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Finance Act 2014

Section 297: Report on Administration of the Scottish Rate of Income Tax


1.This section amends the Scotland Act 1998 to require the Comptroller and Auditor General (C&AG) to make an annual report direct to the Scottish Parliament on HMRC’s administration of the Scottish rate of income tax.

Details of the Section

2.Subsection (1) inserts the requirement to produce the report as new section 80HA in Chapter 2 of Part 4A of the Scotland Act 1998.

3.New section 80HA(2) sets out the scope of the annual report to be laid before the Scottish Parliament. The C&AG) will report on the adequacy of the additional rules (which

  • has the same meaning as “regulations” in section 2(1) of the Exchequer and Audit Departments Act 1921) and processes which HMRC have put in place to administer and collect the Scottish rate. The C&AG) will also report on HMRC’s calculation of the amount of Scottish rate income tax to be paid over to the Scottish Government and on the accuracy and fairness of costs reimbursed to HMRC by the Scottish Government for the administration of the Scottish rate.

4.New section 80HA(3) explains that the “Scottish rate provisions” are those set out in Chapter 2 of the Scotland Act 1998 (or made under powers in that Chapter) and any other provision made elsewhere in the Income Tax Acts relating to the Scottish basic, higher or additional rates of income tax. The Interpretation Act 1978 defines the “Income Tax Acts” as meaning all enactments relating to income tax.

5.New section 80HA(4)-(5) provides that the C&AG) has the discretion to include in the report an analysis of whether HMRC is using its resources in administering the Scottish rate in an effective, efficient and economic manner.

6.New section 80HA(6) requires that HMRC provide the C&AG) with information necessary to complete the annual report.

7.Subsection (2) of the section brings the measure into effect for the financial year ending 31/03/15. As a result of new section 80HA(7), the first report will therefore need to be produced before 31 January 2016.

Background Note

8.The Scotland Act 2012 amended the Scotland Act 1998 to introduce the Scottish rate of income tax, which is expected to commence in April 2016.

9.The Scottish rate will be set each year by the Scottish Parliament and will be operated by HMRC as part of the UK income tax system; HMRC’s costs in implementing and administering the Scottish rate will be reimbursed by the Scottish Government.

10.The Command Paper, “Strengthening Scotland’s Future”, published alongside the Scotland Bill in November 2010 set out that the Comptroller and Auditor General would, as head of the National Audit Office (NAO), be invited to prepare a report to the Scottish Parliament on HMRC’s administration of the Scottish rate of income tax as part of the NAO’s annual report on HMRC’s overall performance.

11.This section clarifies the legal basis for this by requiring the C&AG) to prepare a report covering these matters and lay it before the Scottish Parliament on an annual basis.

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