What the post-indyref landscape means to CA students

A photo of the Leith harbour in Scotland
By Ellen Arnison & Alex Burden, Student Blog

7 October 2016

Two years ago, Scotland voted not to leave the UK: what have the subsequent 24 months meant for CAs and students?

When it became clear that Scotland was not leaving the UK, ICAS vowed to:

  • Provide expertise to the Scottish Government and the UK Government on further devolution – particularly the areas of tax, regulation and wider business policy.
  • Work with the Scottish Government on business policy to help the Scottish economy deliver long-term growth.
  • Work with other business groups and the wider community to bring people together again in the wake of the Referendum result.

Chief Executive of ICAS, Anton Colella, said, "This has been a remarkable political campaign which has energised the democratic process and changed the UK irrevocably. Now is the time for everyone in business and politics to come back together to build the economy, create wealth and deliver a fair and prosperous society."

Scotland was already devolved and so had the Scotland Act 2012 which looked at the Scottish Rate of Income Tax and a couple of other Scotland-only taxes. Before, during and after the referendum, CAs and tax professionals were and still are looking for clarification of the Scottish tax system in the UK and global economies.

ICAS explained what these existing new taxes mean and advised about potential fiscal devolution.

A spokesperson for ICAS said: “As probably the single largest body of financial and tax experts in Scotland, with members throughout the world, ICAS has the depth of knowledge and experience to inform any debate over tax devolution, highlighting opportunities, pitfalls, administrative issues or behavioural responses.”

Changes to the Scottish budget and taxes

After the referendum result, the Smith Commission was set up on 19 September 2014, and former ICAS President, Lord Smith of Kelvin was called up to look at Scotland’s new devolved settlement. The Smith Commission published its report on 27 November 2014 which recommended several changes to the funding of the Scottish Budget.

In August 2015, we were still asking the same question about SRIT, such as what the rate should be and how well publicised it has been to employers and taxpayers. The submission highlighted concerns of the Smith Commission over public understanding of the issue and where accountability lies, and what the impact would be upon savings and dividends income of Scottish taxpayers.

Taxation will again take centre stage at Holyrood and Westminster in Winter 2016, when they will decide Scottish income tax rates and bands, as well as UK public spending in the wake of Brexit. The Scotland Act 2012 is being replaced by the new Scotland Act 2016.

Exciting times in tax administration

The House of Lords looked at devolution issues across the UK and took ICAS evidence into account. Despite the Scottish variable rate of income tax existing since 1998, it has never been used by Holyrood.

At the start of 2016, ICAS tutor Duncan McKellar branded this “an exciting time in tax administration”. As a CA student, you are expected to be able to describe the UK tax system and its role, and the role of HMRC, as well as being able to explain the key aspects of the administration of the tax system.

In March 2016, the Budget brought details of the implementation of existing devolved taxes, Stamp Duty Land Tax and Land and Buildings Transaction Tax (LBTT).

The SRIT was finally implemented on 6 April 2016, and proposals to devolve wider powers on income tax are believed to be forthcoming. There are still employers who are unaware of SRIT, but are generally more familiar with LBTT and Scottish Landfill Tax.

Earlier this year, the agreement between the Scottish Government and the United Kingdom Government on the fiscal framework was announced

Writing for ICAS, Donald Drysdale said: “This agreement will be crucial in underpinning the further powers over tax and welfare that are being devolved to Scotland. It will set and co-ordinate sustainable fiscal policy through its key elements – fiscal rules and fiscal institutions.” He explained in detail about what you need to know.

What does SRIT affect?

The recent Brexit vote has only served to reinforce the differences, so it seems that nothing is certain apart from change! The forthcoming Scottish budget will not result in new tax legislation, but it will be able to set differing tax rates and bands to the Westminster government.

Having different tax rates can result in further complication and if rates go up, how will the Scottish population react? How will businesses handle varying rates across the UK? How will devolved taxes be simplified?

These are the important tax matters that our future CAs will be dealing with, on both sides of the border!

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