Scottish independence: The accountant’s perspectiveby
With the Scottish independence vote looming in just two weeks, AccountingWEB takes a look at some of the key considerations and reactions from the accounting profession.
On 18 September Scotland will hold a referendum to decide whether or not to separate from the United Kingdom.
It’s worth noting that whichever way the vote goes later this month, Scotland has committed to the establishment of Revenue Scotland - the tax authority responsible for collecting devolved taxes from April 2015.
The Revenue Scotland and Tax Powers Bill was recently passed and will now be submitted for Royal Assent in due course.
Much of the independence debate so far has centred around currency, North Sea oil and share of national debt.
From an accountant’s perspective, in the event of a “yes” vote next month, it will most likely be issues around tax, business and auto enrolment dominating discussion on AccountingWEB in the years ahead.
Most would agree that tax is one area of policy which would be ripe for reform.
As a starting point, an independent Scotland should decide on the basic, overarching principles of its new tax system, but it’s unlikely it would stray too far from UK principles.
The ‘Nordic Model’ would most likely be on the table involving the transition to a high-tax economy. However, this model hinges on equality, high trust in government and social cohesion - qualities an independent Scotland would arguably lack. In addition moving from a relatively low-tax system would take a huge amount of time, effort and money.
Targeted tax reforms are more likely to be manageable in the short-term than a complete overhaul of the entire Scottish economy.
But Phillip Fisher said in his column that if he was John Whiting, and should the Scots go for broke, he would immediately be offering his services to create a perfect tax system from scratch.
“Who knows, within a couple of years those lucky devils from the Borders to the Shetlands might have a single income tax rate, no social security contributions, capital gains tax or inheritance tax and a difficult decision on whether to plump for a sales tax similar to VAT.”
But the greatest challenge is likely to be administering the tax system, as well as the costs and time associated with developing it.
ICAS has also noted that most of the Revenue’s policy-making takes place in London, with their Scottish staff holding far less experience.
Small businesses in Scotland and the rest of the UK will have to adjust to clients and customers now being in another country, and possibly with a separate currency.
The Highlander, an AccountingWEB user, said it would be a massively expensive mistake to separate from the UK.
“With Salmonds current plans to remain using the £ we wouldn't be achieving true independence anyway as he who controls the currency controls the country.”
If Scotland leaves the EU, Holyrood and Westminster could negotiate a free trade zone, but if not it’s likely that import and export tax would be charged on any goods crossing the border.
AccountingWEB member ireallyshouldknowthisbut said: “I am English but have several Scottish clients… Once the countries are separate I will not be able to act for a foreign tax system”
On the idea of "portfolio splitting", he asked: “So anyone want a few Scottish BTL clients and a Scottish registered limited company in exchange for some English or Welsh ones?”
Any change to the tax and pensions system would create significant issues for the auto enrolment programme, particularly for companies operating in both countries.
For those companies with employees north and south of the border, you would have to get into who is resident in each country and the definition of that residency.
If Scotland does go for independence then the legislation will still stand in Scotland that employers will have to enrol their eligible staff into a workplace pension.
One potential problem is that NEST won’t be there to support these businesses as it won’t be available to non-UK businesses.
Karen Thomson of the CIPP said in a recent article that with auto enrolment continuing its long and painful process we have to consider what Revenue Scotland’s approach will be.
- Phillip Fisher column: Strange Bedfellows
- Time Out discussion: Televised debate on independence
- Payroll and pensions in an independent Scotland - by the CIPP
What kind of a Scotland would you like to see? (NB: We know it's an emotive issue, but one on which accountants have a particularly relevant perspective. Please bear that in mind and keep the discussion on a professional rather than personal/political level).