The Chartered Institute of Taxation (CIOT) has said that advance notice of changes to both the budget date or potential tax changes would help the devolved governments to better prepare to set their own budgets and operate their tax systems more effectively.

When this situation arose at the start of 2020, MSPs agreed on their tax and spending plans a week before the UK Budget was published, using budget estimates.

However, the CIOT has cautioned that if the same approach was followed this year, a UK spring budget with changes to UK tax system – which was not the case in 2020 – could have the knock-on effect of requiring MSPs to revisit their budget plans before the start of the new financial year.

With the Scottish Parliament expected to be dissolved in March 2021 ahead of the May election, this could reduce the time available to MSPs to agree on their plans.

The CIOT said this highlighted the need for better cooperation between the UK and Scottish governments in an effort to improve the tax policy process and respect the devolution settlement.

In written evidence to the Scottish Parliament’s Finance and Constitution Committee last month, the CIOT called for ‘proactive cooperation between the Scottish and UK Governments’ in order ‘to ensure the tax system and devolution settlement are as effective as they can be’.

Alexander Garden, chair of the CIOT’s Scottish Technical Committee, said: “If next year’s budget process follows the same path as this year, then a UK Budget in mid-March would fall just 2 to 3 weeks before the Scottish Parliament is expected to be dissolved for the May election.

“While MSPs could use estimates to agree on a budget, as they did earlier this year, the difficulty arises if there are significant changes to the UK tax system that have a knock-on effect on the amount of money available to the Scottish Parliament.

“It didn’t happen this year, but if it did next spring, it raises the possibility that the Scottish Parliament would then have to look at revising its own budget plans in short order, subjecting them to parliamentary scrutiny and approval in the middle of a pre-election fever pitch.”

He added: “Any changes to income tax, for example, would need to be agreed before the start of the new tax year in April. While it’s possible that other devolved tax changes could wait until after the election, this could create unnecessary complexity and confusion in the interim period. In the case of LBTT, for example, it could increase or decrease market activity, depending on the type of change proposed.

“Proactively communicating changes in advance of either the budget process or potential tax changes would help the devolved administrations to operate their tax systems with greater certainty and effectiveness.”