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Is Scottish tax treatment of client correct ?

Is there anyway of avoiding taxation of all income at Scottish rates

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I have a client who has always worked in England, but for just over six months in the middle of 2019/20, he was seconded to a Scotland based company. The original company maintained the payroll for him throughout and consequently the P60 details were entered on the 2020 SA return, and PAYE had collected the correct amount of tax. With having no experience of any other Scottish based clients, I did not consider the possibility of any issues, but receipt of an SA302 quickly focused the mind, as the calculation set out a tax liability of over £4000, by reason of the whole years income being assessed at Scottish Rates.

I have now read the relevant HMRC guidance, which indicates that if the taxpayer spends more time in Scotland than in any other part of the UK, their total income is subject to Scottish tax rates, and whilst I could understand the `Scottish period` earnings being assessed at Scottish rates, it seems inequitable that just under 50% of total income, earned in England, is assessed at the higher rates.

Can anyone confirm that this is indeed correct, or are there grounds for mitigation. 

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By neiltonks
13th Aug 2020 14:24

It's true that an individual is always considered a taxpayer in one part of the UK for the whole tax year, even if they don't live there all year, so that can't be challenged. However, are you sure that this person's 'main home' in that year was actually in Scotland? Did they move there for six months and then move back, or did they rent, and maybe travel back to their usual home in England for weekends, holidays etc? Have a look at the guidance around that aspect to see if gives a way out.

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Replying to neiltonks:
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By SolutionsTAS
13th Aug 2020 15:33

Thanks for the reply. The taxpayer retained a rented flat in Birmingham, for a short period, until settled in Scotland, and then was released from the lease. Lived in provided temporary accommodation Scotland, for just over 6 months, and then returned to Birmingham, taking on a new tenancy.

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Hallerud at Easter
By DJKL
13th Aug 2020 14:39

https://www.accountingweb.co.uk/business/finance-strategy/scottish-tax-d...

This older Donald Drysdale article might assist.

See also:

https://www.gov.uk/hmrc-internal-manuals/scottish-taxpayer-technical-gui...

I believe the Nats are proposing to bring in a new test which works around evaluating your reaction to watching Braveheart.

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Replying to DJKL:
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By SolutionsTAS
13th Aug 2020 15:48

Very grateful

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By psimonparsons
17th Aug 2020 11:13

It appears they do meet the Scottish residence test, so for the relevant tax year they are a Scottish tax payer!

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