A brand new framework
Revenue Scotland page: the context within which the new authority will operate, including the approach of the General Anti-Avoidance Rule
The Scottish Parliament approved stage 1 of the Revenue Scotland and Tax Powers Bill without division on 20 May, which means the Bill will now move to the detailed consideration of amendments by the Finance Committee at Stage 2. Now is a good time to take stock of the statutory framework the Bill is putting in place and what it means for the collectionand management of the two devolved taxes – land and buildings transaction tax (LBTT), which replaces stamp duty land tax (SDLT), and Scottish landfill tax (SLfT) – from 1 April 2015.
Functions and standards
First, the Bill establishes Revenue Scotland as the tax authority with responsibility for the collection and management of devolved taxes. Revenue Scotland will be established as an office-holder in the Scottish Administration, which means it will not be part of the Scottish Government and will be accountable to the Parliament, rather than Ministers. Revenue Scotland will be required to prepare and publish a charter, setting out what standards of behaviour and values will be expected of taxpayers and agents – and what taxpayers and agents can expect of Revenue Scotland. Our statutory functions as set out in the Bill make it clear that our duty is not just to collect devolved taxes, but to provide a high standard of service – and that is exactly what we will aim to do.
The Bill provides power for Revenue Scotland to delegate any of its functions relating to LBTT to Registers of Scotland (RoS), and any of its functions relating to SLfT to the Scottish Environment Protection Agency (SEPA), but Revenue Scotland will remain responsible for the functions which those organisations exercise on our behalf. A great deal of work is being done to put in place detailed operational arrangements between Revenue Scotland and its partners – including Police Scotland and the Crown Office & Procurator Fiscal Service, as well as RoS and SEPA.
There will be new First-tier and Upper Tax Tribunals to hear appeals against decisions taken by Revenue Scotland, and they will become part of the new unified Scottish Courts and Tribunals Service when (subject to parliamentary approval) that body becomes fully operational. However, the Bill also provides opportunities for the taxpayer to request aninternal review of a decision before a case goes to
the Tax Tribunals, and to seek independent third party mediation at any stage of a dispute. There will therefore be ample opportunity for taxpayers who are not satisfied with decisions taken by Revenue Scotland to challenge those decisions, and we would hope to resolve as many disputes as possible without the need for expensive tribunal or court cases.
Tackling artificial arrangements
The approach in the Bill to combating tax avoidance, including the General Anti-Avoidance Rule (GAAR), has attracted a lot of interest. This will apply only to devolved taxes for which Revenue Scotland is responsible. The Scottish GAAR provides power for Revenue Scotland to take effective action agains artificial tax avoidance arrangements.Among other things, the definition of “artificiality” allows Revenue Scotland – and the Tax Tribunals – to consider the principles and policy objectives of the tax legislation; whether a tax avoidance arrangement is intended to exploit shortcomings in the legislation; and whether an arrangement lacks economic or commercial substance. This will provide a powerful new tool against artificial – not merely abusive, as with UK GAAR – tax avoidance arrangements, particularly the sort that have plagued the administration of SDLT.
Revenue Scotland will publish guidance about the GAAR which we will consult on before it is put in place, so that there is as clear an understanding as possible on the circumstances that would lead Revenue Scotland to take counteraction under the Scottish GAAR.
The Bill puts in place a comprehensive system for the collection and management of devolved taxes, based on the self-assessment principle, which is very familiar to taxpayers and agents, But it will have distinctive aspects, such as strict time limits applying to both taxpayers and the tax authority instead of the UK concept of “discovery” with a system of strict time limits applying to both taxpayers and the tax authority.
It is not often that the opportunity arises to put in place a brand new statutory framework for the collection and management of taxes in a single piece of legislation. The Revenue Scotland and Tax Powers Bill has provided us with just that opportunity in Scotland. In developing the Bill there has been a great deal of consultation and discussion with practitioners, including the Law Society of Scotland. In moving towards the establishment of Revenue Scotland on 1 April 2015 as Scotland’s tax authority in respect of devolved taxes, we will continue to be as open and consultative as possible.