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Strange Bedfellows : Scottish Independence and Tax Simplification

20th Aug 2014
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There has been much debate about Scottish independence and perhaps it is time to consider how it might affect business and the accountancy profession? It could also provide a perfect model for tax simplification.

It is chastening to think that when I travelled up to Edinburgh for an annual jaunt at the International Festival and Fringe a couple of weeks ago, that might have been the last time I could travel north of the beautiful town of Berwick on Tweed without a passport.

If Scotland does vote for independence, this will inevitably have a drastic effect on the lives of all of those on the far side of Hadrian's Wall (the near side if you're reading this in Edinburgh or Glasgow) but also quite possibly for the Sassenachs.

While Londoners might imagine that the effects will be limited, that may not be the case. For those living in Newcastle or other northern towns and cities drastic change could be on the way.

Having spent over a fortnight in Edinburgh, my perspective on this debate has changed completely. Whereas the English are treating the referendum as a topic to be ignored or regarded as a subject for light entertainment, those with votes often feel very passionate, regardless of which side of the debate they sit on.

Strangely, if badges are anything to go by there would be a landslide "yes" vote. I did not see a single "better together" or "no" badge, although possibly those who wish to stay in the Union are not great wearers of badges.

If Scotland does vote for independence in the referendum on 18 September, there will be all kinds of consequences. In particular, if there is a new currency this will create complications from both personal and business perspectives.

Similarly, if travel is more restrictive that might be an issue, while Scottish purchasers might well want to direct business and their neighbours rather than shopping with those nasty people who have been walking all over them and spending their oil money for far too long.

One of the most fascinating issues for those of us interested in finance will be the kind of taxing regime that the new Scotland chooses.

While the Office of Tax Simplification has done its best to improve the UK's haphazard system, the Scottish Chancellor could start with a completely clean slate. The mouth waters at the prospect of creating the perfect tax regime that will be the envy of the world.

If I were John Whiting, after undergoing all of the frustrations of trying to install change in a climate where the powers that be are frequently resistant, should the Scots go for broke, I would immediately be offering my 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.

In reality, most people I spoke to in Edinburgh seem to feel that while a "yes" vote would be exciting and possibly desirable, the most likely outcome is a continuation of the status quo.

Should that come about, by 19 September be independence debate will be forgotten for at least a generation and we will all have to go back to being one big, happy British family.

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By Old Greying Accountant
20th Aug 2014 22:11

Speak for yourself ...

... I am English, in NW Surrey, I and keenly aware of the importance of the vote, which will I believe be catastrophic for Scottish businesses if Salmond gets his way.

My worry is that the majority of the vote may be yes as they are the 80% with nothing to loose personally (certainly immediately) but the 20% that will be expected to bank roll the Great Salmond Scottish Utopia will not be so lucky.

Long term if it is a yes and the nationalistic celebrations have cooled my certain belief is they will regret it.

I was recently sent this, made me smile anyway!

The Queen is in  Glasgow and she bumped into Alex Salmond.

HMtQ:  How nice to see you Mr Salmond.

AS:  Nice to see you Ma’am. Now, what are we going to call  Scotland when we win Independence ? How about calling it a Kingdom, and then I’ll be a King?

HMtQ:  No, we don’t like that.

AS:  Empire, and I'll be Emperor?

HMtQ: No.

AS:  All right, so how about calling it a Principality, and then I’ll be a Prince?

HMtQ:  No, Mr Salmond, I suggest we call it a Country and you can carry on as you are.

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By JC
21st Aug 2014 08:09

Times 20 Aug - English voters harden their view ...

Interesting ......

Quote

English voters want the government to take a hard line against Scotland even if its residents vote “no” to independence. Funding should be cut and Scottish MPs should no longer have a say over English matters, according to a survey.

Researchers found English voters overwhelmingly in favour of Scotland remaining in the United Kingdom and keen that Westminster rejects a currency deal and Scotland’s membership of the EU and Nato if it votes for independence.

Westminster has pledged to retain the Barnett Formula, which determines Holyrood’s grant. However, after a “no” vote the English electorate wants to see public spending on Scotland cut to the UK average. It also wants to see Scottish MPs excluded from English votes.

English voters would not support Scotland applying to join organisations such as EU and Nato. As the continuing member of both, the UK could veto Scotland’s memberships. Only 26 per cent of those surveyed said that the UK should be supportive, while 36 per cent disagreed.

Charlie Jeffery, of the University of Edinburgh, said: “It is striking how tough people in England are on Scotland. The message appears to be ‘vote yes by all means, but if you do, you’re on your own’.”

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By ShirleyM
21st Aug 2014 08:49

Isn't the government going the other way?

I can't find the news article now, but hasn't the government promised that Scotland will have more support/funding/independence, if they decide to stay in the Union?

I remember it, as I thought what a canny move by Salmond. Even if they don't get independence, he will still claim he won by getting a better deal.for Scotland.

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By Ruddles
21st Aug 2014 09:47

Nailing my colours to the mast

As a 'no' voter, my concern is that, having spoken to a large number of yes voters, it is clear that the large majority of those voters are voting yes out of blind patriotism without any regard to the arguments or potential consequences. I am Scottish and proud of it - but believe the country of my birth will be best served by remaining part of the Union. The suggestion by certain yes men - including senior members of SNP - that to vote no is cowardly and unpatriotic is offensive in the extreme and only serves to illustrate the underhand tactics that they will use to get their way.

I'm not saying that I believe every point made by the Better Together campaign - the point is that they have identified and intelligently argued the many reasons why independence would not work. The other side's response appears to be a simple and belligerent "yes that will work, yes we can have the pound etc etc" without any credible evidence to support their stance.

Most recently there is the question of oil reserves - the financial bedrock of the SNP campaign. We have an independent oil expert warning us that reserves may not be sufficient to generate the finances required by an independent Scotland  - quoting a range of future capacity. Then we have the SNP's energy minister rubbishing the claim, citing only the higher end of the scale. To argue that we should proceed with independence on the assumption that reserves WILL be that higher figure is utter folly.

In short, while I am not a particular fan of any politician I neither believe nor trust SNP and I worry that many of my fellow Scots will be hoodwinked by false promises of great wealth or, as alluded to above, are simply confusing patriotism with something else.

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By ireallyshouldknowthisbut
21st Aug 2014 10:53

.

I am English but have several Scottish clients. 

I have been mentioning in passing that if the "yes" win out then once the countries are separate  I will not be able to act for a foreign tax system. 

Curiously one of them who is very pro "yes" said I was being silly and trying to influence her.

The "no's" seemed to understand this implicitly. 

I was musing about the "portfolio splitting" that will have to occur for many smaller accounting firms which wont be able to maintain tax knowledge on "both sides of the border".

So anyone want a few Scottish BTL clients and a Scottish registered limited company in exchange for some English or Welsh ones? All dealt with remotely and lovely people (I only deal with lovely people).

 

 

 

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Replying to Tom 7000:
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By Old Greying Accountant
22nd Aug 2014 09:45

My big potential Headache ...

ireallyshouldknowthisbut wrote:

I am English but have several Scottish clients. 

I have been mentioning in passing that if the "yes" win out then once the countries are separate  I will not be able to act for a foreign tax system. 

Curiously one of them who is very pro "yes" said I was being silly and trying to influence her.

The "no's" seemed to understand this implicitly. 

I was musing about the "portfolio splitting" that will have to occur for many smaller accounting firms which wont be able to maintain tax knowledge on "both sides of the border".

So anyone want a few Scottish BTL clients and a Scottish registered limited company in exchange for some English or Welsh ones? All dealt with remotely and lovely people (I only deal with lovely people).

 

... is my England and Wales registered US owned Aberdeen based company - they are only just after 3 years getting their heads around VAT, rates, PAYE etc!

I would imagine ACCA will licence me for Scotland but I will have to do relevant CPD - and the software houses will have a field day, prices will go up as they will need to be compliant in both regimes if there is a split.

My concern is that the socialist, trade unionist, nationalists with nothing to lose wil actually end up wrecking the country they purport to love so much.

I am an English patriot and feel as strongly for my country and my heart says let them go if they want, but, my head says better together and although they are like an annoying little brother at times, you wouldn't want them to leave the family.

That said, I have a number of other clients in Scotland and on an individual basis I have never had a problem, I get no resentment from staff when I visit - it would be sad if the yes vote is carried on the basis of unfounded stereotypes rather than the actuality of the situation.

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By The Highlander
21st Aug 2014 10:54

Together we stand, divided we fall!

As a proud Scot I couldn't agree more with Ruddles. 

It will be a massively expensive mistake to separate from the UK and 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.

I do feel extra devolved powers is the way to go and suspect/hope that this is Salmonds true aim.  Independence would create a long, complicated and eye wateringly expensive exercise that could take years to effectively implement by which time we will have wasted any possible gain and laden our future generations with further debt.

Of course I could be wrong and perhaps independence will create a wonderful utopia where nobody pays tax, everyone is paid more and the Scottish government still has the ability to double our education, healthcare and infrastructure budgets despite the fact we can no longer access any EU grants.

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Chris M
By mr. mischief
21st Aug 2014 18:27

Relax folks

Betfair has called all 50 US states in all 3 of the last US presidential elections.  That's because the odds on that site are formed by people putting their hard cash down, not pundits in studios with a vested interest in saying it is "too close to call".

Well I called this one NO on Facebook nearly a month ago now.  Currently it is 14% likely that there is a Yes vote on 18 September, down from a high of 25% or so back in May.  This one is dead in the water.  Barring something stupid from London - like Cameron going to Scotland, or invading Iraq! - nothing the Yes troops can do can save them from defeat.

I totally agree though that both Scotland and the rest of the UK are completely unprepared for a Yes vote.  Given that Slovakia and the Czech Republic are still haggling over the fine print of their split in 1991, in the unlikely event that a Yes vote goes through I'll fill my boots with Slater and Gordon and other quoted law firms with UK business!

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Sarah Douglas - HouseTree Business Ltd
By sarah douglas
22nd Aug 2014 07:32

50:50 where I am

Hi 

My family and friends are divided.  However I am happy to except the vote whatever it might be as I believe Scotland could be successful whatever it chooses.  I am undecided from week to week for various reasons.  I was a definite No before it started and I am now not sure.   Alisdair has not run the No campaign very well and many no voters I am friends with agree.

 I think it is quite arrogant to think if someone is not voting the way you want, to say they are blindsided or stupid which many have done in this debate on both sides.  I respect those on accounting web tough who have a different opinion to me on this.

Both friends and family who are voting Yes and No have thought very hard about their decision. Both sides have good points. 

So when I wake up on the 19th whatever the decision friends and family will all come together and make it work.  I have not met any family at full war because they do not agree.  I also strongly believe that no persons vote is any more intelligent than any one else's.  I have always found that view disagreeable.  The BBC really annoyed me during the Scottish Elections when they refer to the intelligent vote in Westend of Glasgow and parts of Edinburgh that view used to make me shout at the tv.

the vote is not about Alex Salmond or Alsdair Darling they are both irrelevant. It is about what Scotland thinks is best for their future.    I do not think Scotland is treated any worse for example then the North East of England or Summerset.  Yes, the North East of England are very much in my thoughts when I make this decision.

However I do not think we would have be having this vote if Westminster cared for all parts of the UK and not just London and surrounding areas.   Policies could have been made in the past to look after all of the UK from all the parties in the past.

 Then maybe we would not have London (Westminster) sucking the life out of the rest of the UK and I mean Westminster not London people themselves.  Young people do not stand a chance in London any more, no one can afford to live there and the city is already packed to the rafters.  Why does Westminster continue to overcrowd London.?

The Current Polls as per the newspapers this week has a 2% swing between them and 14% undecided.  So my personnel view is there is plenty that can go wrong.  The yes vote increased by 2 to 4% depending on which poll you read but still increased and that was after all the papers declared Better together had won the TV debate hands down which in itself was strange as most people I spoke to on either side, thought neither had won. 

 

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Chris M
By mr. mischief
21st Aug 2014 20:51

I don't agree with the view about London

I live in the Lake District and we get the North East news, and I spend about 20 days a year in Scotland and the Scottish news and North East news are very similar.

There is a hefty dose each night - often from public sector folk - of people whingeing, often blaming London for its success.  Because taking a long hard look in the mirror at your own failings would be much too tough.

The Scotland which was a success story was founded on guys like Adam Smith.  The idea that the public sector could consume 50% of GDP - as it does in Scotland and the North East - would have him spinning in his grave.

If Scotland could kick the "someone else needs to fund my salary / university education / benefits / pension" mentality into touch and get back that culture of science, expansion and paying one's own way in the world without trampling on anyone else, it could easily be a success story. 

However, I suspect the Irish model of independence is likely to be closer to the truth.  Constantly looking for some "feckers" to blame for the problems.

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Sarah Douglas - HouseTree Business Ltd
By sarah douglas
21st Aug 2014 21:49

It had nothing do with the News . You can see it when you travel

It has nothing to do with the News and that was not my point.  The rest of the UK including Summerset and the West Region, Parts of North East England , Parts of Wales and parts of Scotland and Northern Ireland are dying on their feet due to decisions made at Westminster. 

It is not about blaming London for being successful.  I love London.  There are also parts of London dying on their feet due to Westminster decisions you just have to take a short walk off the tourist track.

I was explaining in my post why people felt the way they did.  I clearly said I was undecided. By your post though I would have taught who would be happy to see the back of the Scotland as in your view they are clearly costing you money and a drain on society.

You do remember the UK was bailed out in  1976.  Every country is always open and can not sit on their laurels

 

http://www.nationalarchives.gov.uk/cabinetpapers/themes/imf-crisis.htm

http://www.ft.com/cms/s/2/11484844-b565-11df-9af8-00144feabdc0.html#axzz3B3tL9Tbe

 

 

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Chris M
By mr. mischief
21st Aug 2014 22:02

no!

No!  If Scotland were to stop blaming England for its failings, ditch the "somebody else needs to fund me" mentality and really kick some [***] like it did before the 20th century - and still does in some pockets like Aberdeen and Silicon Glen - then of course it would be a success.

The problem is that it seems unlikely to me that this would happen, more likely they would follow the Irish model of independence from England.

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By Ruddles
22nd Aug 2014 08:17

Inadequate responses

My complaint is that the Yes campaign refuse to (presumably because they can't) present a coherent response to ANY of the fundamental questions, such as "How do you know we can keep the £, how do you know that we can remain part of the EU etc". I'm afraid that "Just because we will" is no answer at all.

The raison d'etre of SNP is and always has been to achieve full independence for Scotland. It stands to reason that they and thier supporters will say and do anything to achieve that goal and for that reason alone they cannot be trusted. Mr Salmond's pig-headed behaviour in yesterday's First Minister Questions is a perfect illustration of that.

I agree with comments above that the Better Together campaign could have been better led, but that is irrelevant. This is a vote for a fundamental change, and it is therefore the case FOR that change that needs to be scrutinised - I'm actually not particularly interested in what the no campaign have to say, I'd like to be convinced by the other side that there is indeed a case for independence - because so far, they have failed to demonstrate that they even have a case.

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By Old Greying Accountant
22nd Aug 2014 09:55

Thing is ...

... the problems now were not caused by the current government, we have years of government by a disproportionately Scottish represented Labour cabinet. It is very easy to use the English Toffs in Westminster to push for a yes vote, even though it was Scottish labour MP's to blame as much as anyone.

The current government does I believe realise the problems and are trying to enrich and encourage the regions, may be they haven't got the right answers yet but they are in my opinion genuinely trying to spread the wealth better.

My fear is there are more voting with heart with no real clue as to the ramifications than those who have based a decision on what their heads tell them. If that is yes, then I respect that, but do not respect those who vote yes from blind nationalism. And as for 16 year olds voting, that is quite ludicrous to me.

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By Ruddles
22nd Aug 2014 10:13

Young voters

I agree, OGA - though understand the rationale. The younger generation is the one that would most immediately and in the medium-term feel the effects of independence, or so it is argued. On that basis, though, the vote should have been removed from anyone aged over, say, 90. (Probably 85, given the shorter life expectancy up here.)

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By johnporter
22nd Aug 2014 12:52

Independence Debate

Maybe we should all just be grateful that it is a relatively civilised debate that is going on . You only have to think of Irish Independence & the current situation in the Ukraine.

.Being only 10 miles form Faslane (nuclear sub base for those in the south) the latter would have cause some concern. Only positive in that being that will save on funeral costs & enough Whisky to dull the pain.

As for my vote if someone had asked me 40 years ago it would have been a Yes but the world has moved on & I question even at 60 question if I have a right to vote when really it is the younger generation that will have to live with the consequences one way or another.

It is strange that the Conservatives are keen to hold onto Scotland as without the 50 odd scottish Labour votes they would rule supreme for years to come.

 

 

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By hwillia2
22nd Aug 2014 17:46

Scotiish Independence & Tax
Much of this debate shows why Scotland wants independence. The first few commnents talk about England and English. No mention of Wales or N.Ireland. Too many of the English, UK = England. You ignore the rest of us. Scotland wants independence because it wants to be recognised as a country, not a pseudo-England. As for a clean slate, if it wants to be part of the EU then it will have VAT. And what is this all about not being able to use the £? Does this mean that if in turn Wales and N.Ireland left in turn then the only one allowed to use the £ would be England? Or if England left, it wouldn't be allowed to take the £ with it? Again this claiming of sole ownership of everything as UK = England is part of what has driven Scotland to want to leave.

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By Old Greying Accountant
23rd Aug 2014 13:59

I'm sorry ...

... but my experience is that the English see the UK as a whole made of constituent countries and are respectful of those, it seems that Wales and Scotland continue to hold on to the myth that UK = England. N Ireland is a different kettle of fish entirely and is much more complex, but again the protestants there want to be part of an England that doesn't exist anymore - if they were given a vote I think that Ireland would be better re-united, by that is beside the point.

Don't mix up England with Westminster, as others have said, anywhere in England outside the M25 is as invisible to Westminster as Scotland, Wales and Northern Ireland. That said of the 64 million UK inhabitants around 1/3 do live within the M25!

Who are he English anyway? In London only around 1/3 are described as White British, many of these will be Scots, Welsh or Irish, and possibly migrants from other former colonies, I would be surprised if there are more than 25-30 million white English, who I think are the ones that are referred to with such vehement hostility by Scottish and Welsh nationalists! It wouldn't surprise me either if there were more Scots living south of the border than north, and I have English family living north of the border., independence would just create a great big mess - Germany spent years getting a wall dismantled and now Salmond wants to build a new one!

We are such an inextricably linked society now the whole issue is to me is a futile waste of time and money that could be better spent on real issues. I have no problem with Welsh and Scottish parliaments and "local" laws, but we are better off as a whole - a US style federal model would be better than complete isolation from each other.  

As I see it, if the yes vote carries the day the Scots will be stuffed as they will no longer be able to complain about being shafted by Sassenach politicians, as it will be Scottish ones shafting them then. I think the words of Joni Mitchell will haunt the Scots if they vote yes - "don't it always seem to go, you don't know what you've got 'til it's gone?"!

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Chris M
By mr. mischief
23rd Aug 2014 08:45

status after a yes vote

The Queen was in Glasgow and she bumped into Alex Salmond.

HMtQ: How nice to see you Mr Salmond.

AS: Nice to see you Ma’am. Now, what are we going to call Scotland when we win Independence ? How about calling it a Kingdom, and then I’ll be a King?

HMtQ: No, we don’t like that.

AS: Empire, and I'll be Emperor?

HMtQ: No.

AS: All right, so how about calling it a Principality, and then I’ll be a Prince?

HMtQ: No, Mr Salmond, I suggest we call it a Country and you can carry on as you are.

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By JC
23rd Aug 2014 09:17

@mr. mischief - Duplicated ....

Try reading 1st reply to this thread

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Chris M
By mr. mischief
23rd Aug 2014 20:02

Oops!

Rumbled!

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