Powers to spy on the two-home tax cheats

Under the Scotland Bill, which the SNP agreed to support last week, the Scottish parliament will have the power to decide on a new rate of Scottish income tax, meaning there could be a marked difference in the rates paid by residents either side of the Border.

The government has now revealed a detailed set of measures to ensure the changes do not lead to new tax avoidance loopholes and to prevent people dodging taxes in the country with the higher rate.

The new income tax power is the centrepiece of the Scotland Bill which will devolve a set of tax-raising powers to MSPs from 2015.

As a result of the changes, all taxpayers in Scotland will get a new tax code and be defined as a “Scottish taxpayer” on the basis of where they have their main place of residence.

For those with homes in Scotland and another part of the UK, HM Revenue and Customs may carry out checks if, for example, they suspect a Scottish resident has bought a home in England and registers it as their main place of residence purely to avoid a higher tax rate north of the Border.

Several members of the House of Lords, such as Lord Forsyth, have raised doubts about how a separate Scottish tax might operate. With regard to a case where someone who resides in both parts of the UK and can therefore choose which tax-rate to adopt, Treasury minister Lord Sassoon wrote in a letter to peers last week: “The question will arise only for the small minority who already have a place of residence in Scotland and one elsewhere in the UK.”

However, he confirmed: “HMRC will undertake compliance activity to check the addresses which people report as their main place of residence, where there is a risk of significant tax underpayments.”

Lord Sassoon also said oil rig workers who have main homes in England will not be Scottish taxpayers, no matter how many days they spend on a rig.