Scottish taxpayer status: ICAS calls for clarity

River Clyde
By Anne-Marie Roberts, Head of Taxation - Scottish Taxes and Indirect Taxes

28 July 2015

ICAS responds to the draft HMRC guidance on establishing Scottish taxpayer status and calls for greater clarity and refinement.

The Scottish Rate of Income Tax (SRIT), as introduced by the Scotland Act 2012, will be charged on the non-savings and non-dividend income of those defined as Scottish taxpayers and applies from 6 April 2016 – which is looming on the horizon.

Defining Scottish taxpayer status

The definition of a Scottish taxpayer is focused on where an individual lives in the course of a tax year.  HMRC has recently published technical guidance on establishing Scottish Taxpayer status for liability for the SRIT. 

ICAS has recently submitted its response PDF [180 KB] to this guidance.Scottish taxpayer status is determined by HMRC and notified to taxpayers. 

The legislation stipulates a close connection test and the guidance outlines how HMRC intend to interpret a close connection with Scotland and gives examples to illustrate the position of different types of individuals.

The three tests

The guidance indicates that an individual will be a Scottish taxpayer if they are resident in the UK for tax purposes and, in the course of a tax year, they satisfy any of three tests:

1. They represent a Scottish constituency in the Scottish parliament, at Westminster or in the European Parliament

2. They have a "close connection" to Scotland, through either:

  • Having only a single "place of residence", which is in Scotland.
  • Where they have more than one "place of residence", having their "main place of residence" in Scotland for at least as much of the tax year as it has been in another part of the UK.

3. Where no "close connection" to Scotland (or any other part of the UK) exists - through day counting- if the individual spends at least as many days in Scotland as elsewhere in the UK

The draft guidance considers the interpretation of the terms  "place of residence" and "main residence" and outlines the factors that will be considered – where an individual's family is located, where possessions are located, how residences are furnished and registration to vote are some of the factors identified.
The draft guidance is aimed at HMRC staff and tax advisers and other interested businesses.  HMRC will release further guidance for individuals and employers. 

The ICAS response

ICAS has urged HMRC to make this additional material available to raise awareness of the issues and start its public information campaign on SRIT as soon as possible.
The ICAS response PDF [180 KB] to the consultation makes a number of points on the draft guidance:

  • The guidance focuses on the 'close connection' tests for SRIT, with insufficient emphasis on the initial qualification which is that an individual must be UK resident for income tax. Until UK residence is established, the test of Scottish 'close connection' is not relevant and the relationship between the two tests should be covered in detail.
  • The UK residence test includes provisions that allow an individual to have a split year treatment where they arrive or leave the UK. The draft Scottish guidance is unclear and unhelpful in addressing the position of arrivers and leavers.
  • The guidance has extensive coverage of the case law on residence which is relevant to capital gains tax and relates to an exemption from tax rather than to establish the taxing rights of a part of the UK. The emphasis in the guidance on the concept of residence is unhelpful and does not reflect the actual test in the legislation of a "close connection". The 'close connection' test is not tied to the private residence exemption from capital gains tax and it would also be useful to confirm this in the guidance.

Response to HMRC on Scottish taxypayer status

Download PDF [278 KB]


  • Consultations and responses
  • Tax

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