- Tuesday, 02 September 2014 15:17
- Written by Andy Vessey
Will Scotland retain IR35?
With the Scottish independence referendum just weeks away, some contractors have been asking if an independent Scotland will keep IR35.
Whilst Alex Salmond may be the only one to answer that question at present, the possibility may have moved a step closer with the passing of the Revenue Scotland and Tax Powers Bill. The Bill has recently been passed by the Scottish Parliament and regardless of the outcome of the referendum on18th September will alter the face of Scottish taxation.
Since the passing of the Scotland Act in May 2012 a number of powers have been delegated to the country but this current Bill will:
- establish Revenue Scotland and provide for its general functions and responsibilities;
- make provisions about the use and protection of taxpayer and other information;
- establish Scottish tax tribunals;
- introduce a general anti-avoidance rule (GAAR) in relation to artificial tax avoidance schemes;
- set out powers and duties of taxpayers and Revenue Scotland, outline the arrangements and time limits for self-assessments and Revenue Scotland assessments;
- make provisions for Revenue Scotland's investigatory powers;
- set out when penalties can be imposed;
- make provisions for interest on unpaid tax;
- provide for debt enforcement by Revenue Scotland; and
- set out the review and appeals process;
The Bill was passed by the Scottish Parliament on 19th August and once it receives Royal Assent will establish Revenue Scotland as the tax authority for raising taxes on land transactions and on landfill waste disposal from April of next year, at which point Stamp Duty Land Tax and Landfill Tax will not apply north of the border. It is expected that new Scottish rates of tax will begin in April 2016.
For the time being therefore, what can be said with some certainty, is that should the good people of Scotland vote to break away from the Union, then contractors working in Scotland but who remain UK resident will not be able to escape IR35. However, would a non-IR35 Scotland, coupled with a more favourable rate of corporation tax be incentive enough to attract freelancers to settle there?