Potential for Scottish taxpayers confusion raised by HMRC letter

The letters will simply state that individuals have been identified as Scottish taxpayers and that from next April some income tax will be paid to the Scottish government.

There is no dedicated phone line but simply an online reference and an assurance that contact centres have been briefed. HMRC decided that due to low levels of awareness the letter should go now rather than once the new Scottish Rate of Income Tax (SRIT) has been announced on 16thDecember.

Martin Bell, Tax Partner at BDO LLP, said: “This exercise is more likely to confuse rather than clarify the situation for Scottish taxpayers and demonstrates the concern that HMRC must have regarding the general lack of knowledge about the introduction of SRIT which is only 4 months away. It is intended to identify the number of Scottish taxpayers that will be liable for the new SRIT whilst being unable to state what that level of tax will be or how an individual‘s Scottish tax take will be collected (i.e. whether differently than at source).”

“Employers with fluctuating workforces may need to establish new methods of keeping track of their employees’ addresses to ensure they are compliant. The lack of any overt infrastructure dedicated to dealing with Scottish tax enquiries means that for someone receiving this letter there will be no obvious way to obtain further elucidation. Given that HMRC will have to issue a further letter in the near future stating what the tax rate in Scotland will be, this seems a rather pointless communication.”

Mr Bell added: “There may be some individuals who wish to assess their residency position depending on what the Scottish tax rate is, and for obvious reasons this letter does little to inform them about what the differences might be from April 2016 onwards.

“While it is usually a good thing for HMRC to communicate with taxpayers in advance of a major change, it has to be done meaningfully. This letter could easily be sent after December 16thfollowing the Scottish Budget and contain a lot more helpful information about how SRIT will work and what it means for the Scottish taxpayer.”