Scots income tax transfer ‘runs into difficulties’

HMRC have issued a "red alert" warning as they struggle to identify Scots taxpayers. Picture: JP

HMRC have issued a "red alert" warning as they struggle to identify Scots taxpayers. Picture: JP

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OFFICIAL papers have rev­ealed that efforts to transfer control of income tax over to Scotland have run into serious difficulties because HM Revenues and Customs is struggling to work out who Scottish taxpayers are.

The HMRC risk register in October, which has been rel­eased under freedom of information, has issued a “red alert” warning when it comes to identifying Scottish taxpayers.

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The warning comes just a year before SNP finance secretary John Swinney is set to announce the first Scottish income tax rate for the new powers coming on stream for Holyrood.

The revelation has led to accusations from Labour that both the UK and Scottish governments have been “asleep at the wheel” in the complex process of setting up a separate income tax for Scotland.

The transfer of 10p out of the 20p basic rate income tax was the most significant recommendation of the commission chaired by Sir Kenneth Calman, whose recommendations formed the basis of the 2012 Scotland Act.

The problems identified also pose problems for the recent recommendations of the commission chaired by Lord Smith of Kelvin, where the Tories, Labour, Lib Dems, SNP and Greens agreed to Holyrood having complete control of income tax.

HM Revenues and Customs’ tables reveal that identifying taxpayers has been moved from an amber warning in January to red alert over the summer, where it
remains.

HM Revenues and Customs would not specify the problems in identifying Scottish taxpayers.

However, it is understood that the difficulties appear with people who live both sides of the Border at different times of the year along with working out where British nationals who live abroad should pay their tax.

Another problem arises with people who live in England but work for a Scottish- based company or live in Scotland and work for a company based in another part of the United Kingdom.

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