HMRC Faces Scottish Income Tax Challenges

by Amanda Banks, Tax-News.com, London

21 December 2016

HM Revenue and Customs (HMRC) faces "significant challenges" in administering the devolved Scottish income tax system, according to a report by the National Audit Office.

The report said that HMRC needs to ensure that all Scottish taxpayers are correctly identified, noting that the authority had failed last year to inform 420,000 people who would potentially have to pay the Scottish Rate of Income Tax.

The NAO said that while HMRC has since tackled the issue by revamping its IT system, the tax authority must focus on maintaining and updating its records of taxpayers' addresses.

"HMRC face significant challenges in administering the Scottish Rate of Income Tax (SRIT), particularly when tax rates and thresholds differ between Scotland and the rest of the UK," said Amyas Morse, Head of the NAO. "It is crucial that it maintains accurate address information for Scottish taxpayers, and ensures that the potential for tax avoidance and evasion is mitigated.

"HMRC also needs to be able to report the actual amount of SRIT collected to the Scottish Government, and provide an IT solution that allows private pension providers to claim relief at source."

Scotland last week announced that the threshold for the higher 40p rate from April 2017 would be lower than the rest of the UK at GBP43,430 (USD53,568) in its first draft Budget since being given the power to set its own individual income tax policies.

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