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Society gives its view on implementing tax clauses in Scotland Bill

26 January 2011

Any changes to Scotland’s tax powers need to be fully tested before implementation to avoid confusion among employers and staff, the Law Society of Scotland said yesterday.

Isobel d’Inverno, convener of the Society’s Tax Law Committee, and David Bennett, convener of the Company Law Committee, were giving oral evidence to the Scottish Parliament’s Scotland Bill Committee on the areas of income tax and insolvency.

Raising concerns about the definition of "Scottish taxpayer" contained in the bill, Ms d'Inverno said: “The Society feels the definition included in the bill will be very complicated for an ordinary person to understand and it is important to ensure a simpler definition is created for all to understand.”

Afterwards, she explained: “This will be important to define for people who move between Scotland and other parts of the United Kingdom, for example those who live in Scotland yet work in England and vice versa.” Consideration also had to be given to those working on ships or oil rigs, or serving in the armed forces.

The Society raised concerns in its written evidence that payroll standards written before the Scottish rate of income tax comes into effect will take some time to test in order to confirm their capability. A considerable amount of underlying administrative work requires to be undertaken, in order to ensure the proper administration of the tax in a fair and equitable way so as to give certainty to PAYE taxpayers that the tax deducted from their salary is correct, and to avoid underpayments or overpayments.

Re-reserved

The insolvency clause contained in the bill proposes re-reserving this power to Westminister. David Bennett said: “There is a case for re-reserving power to make procedural rules in insolvency back to Westminister. At the moment there is wide variety of rules applying to a company undergoing voluntary arrangements and indeed sometimes two sets of rules apply to the same issues, which can make it complicated and confusing.”

Ms d'Inverno said that dealing with things through PAYE did not mean it was an easy approach and the Society knew of instances of PAYE underpayments and problems with coding. It might be necessary to ask people to fill in tax returns online.

“The Society is concerned about getting these rules fit for purpose to ensure they are effective and minimise costs to creditors of Scottish companies.”

The Society will present evidence on the remaining clauses in the bill on Wednesday 2 February.

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