Finance Act 2014 (c. 26)

SCHEDULES

Section 296

SCHEDULE 38 Scottish basic, higher and additional rates of income tax

PART 1 Amendments of ITA 2007

1 ITA 2007 is amended as follows.

2 In section 6 (the basic rate, higher rate and additional rate)—

(a) omit subsections (2A) to (2C), and

(b) in subsection (3), after “see—” insert—

“(za) section 6A (Scottish basic, higher and additional rates),”.

3 After section 6 insert—

“6A The Scottish basic, higher and additional rates

(1) The Scottish basic rate, the Scottish higher rate and the Scottish additional rate for a tax year are calculated as follows.

• Step 1

  Take the basic rate, higher rate or additional rate.

• Step 2

  Deduct 10 percentage points.

• Step 3

  Add the Scottish rate (if any) set by the Scottish Parliament for that year.

(2) For provision about the setting of the Scottish rate, see Chapter 2 of Part 4A of the Scotland Act 1998.”

4 In section 10 (income charged at the basic, higher and additional rates: individuals)—

(a) omit subsections (3B) and (3C), and

(b) in subsection (4), at the appropriate place, insert—

“section 11A (income charged at the Scottish basic, higher and additional rates),”.

5 After section 11 insert—

“11A Income charged at the Scottish basic, higher and additional rates

(1) Income tax is charged at the Scottish basic rate on the income of a Scottish taxpayer which—

(a) is non-savings income, and

(b) would otherwise be charged at the basic rate.

(2) Income tax is charged at the Scottish higher rate on the income of a Scottish taxpayer which—

(a) is non-savings income, and

(b) would otherwise be charged at the higher rate.

(3) Income tax is charged at the Scottish additional rate on the income of a Scottish taxpayer which—

(a) is non-savings income, and

(b) would otherwise be charged at the additional rate.

(4) For the purposes of this section, “non-savings income” means income which is not savings income.

(5) This section is subject to—

• section 13 (income charged at the dividend ordinary, upper and additional rates: individuals), and

• any provisions of the Income Tax Acts (apart from section 10) which provide for income of an individual to be charged at different rates of income tax in some circumstances.

(6) Section 16 has effect for determining the extent to which the non-savings income of a Scottish taxpayer would otherwise be charged at the basic, higher or additional rate.”

6 In section 13 (income charged at the dividend ordinary, upper and additional rates)—

(a) in subsection (1)(b), after “the basic rate,” insert “or the Scottish basic rate,”,

(b) in subsection (2)(b), after “the higher rate,” insert “or the Scottish higher rate,”,

(c) in subsection (2A)(b), after “the additional rate,” insert “or the Scottish additional rate,”,

(d) in subsection (3), after “section 10” insert “or 11A”, and

(e) in subsection (4), after “the basic, higher or additional rate” insert “or the Scottish basic, higher or additional rate”.

7 In section 16 (savings and dividend income to be treated as highest part of total income), in subsection (1), for paragraph (za) substitute—

“(za) the rate at which income tax would be charged on the non-savings income of a Scottish taxpayer apart from section 11A,”.

8 In section 809H (charge on nominated income of long-term UK resident), for subsection (3A) substitute—

“(3A) If the individual is a Scottish taxpayer for the relevant tax year, the individual is to be treated for the purpose of calculating income tax charged by virtue of subsection (2) as if the individual were not a Scottish taxpayer for that year.”

9 In section 828B (conditions to be met for exemption where individual resident but not domiciled in the UK), in subsection (5), after “the basic rate” insert “, the Scottish basic rate”.

10 In section 989 (definitions for the purposes of the Income Tax Acts)—

(a) in the definitions of “additional rate”, “basic rate” and “higher rate”, omit “or (2B)”, and

(b) at the appropriate place, insert—

• ““Scottish additional rate” means the rate of income tax of that name calculated in accordance with section 6A,”,

• ““Scottish basic rate” means the rate of income tax of that name calculated in accordance with section 6A,”,

• ““Scottish higher rate” means the rate of income tax of that name calculated in accordance with section 6A,”,

• ““Scottish taxpayer” has the same meaning as in Chapter 2 of Part 4A of the Scotland Act 1998”.

11 In Schedule 4 (index of defined expressions), at the appropriate place, insert—

“Scottish additional rate

section 6A (as applied by section 989)””

“Scottish basic rate

section 6A (as applied by section 989)”

“Scottish higher rate

section 6A (as applied by section 989)”

“Scottish taxpayer

section 989”

12 The amendments made by this Part have effect in relation to the tax year appointed by the Treasury under section 25(5) of the Scotland Act 2012 and subsequent tax years.

PART 2 Consequential amendments

13 In section 1 of the Provisional Collection of Taxes Act 1968 (temporary statutory effect of resolutions of House of Commons), omit subsection (3A).

14 (1) In section 7 of TMA 1970 (notice of liability to income tax and capital gains tax), in subsection (6), after “the basic rate,” insert “the Scottish basic rate,”.

(2) The amendment made by sub-paragraph (1) has effect in relation to the tax year appointed by the Treasury under section 25(5) of the Scotland Act 2012 and subsequent tax years.

15 (1) TCGA 1992 is amended as follows.

(2) In section 4 (rates of capital gains tax), in subsections (4) and (5), after “the higher rate” insert “, the Scottish higher rate”.

(3) In section 4A (section 4: special cases), in subsection (5), after “at the higher rate” insert “, the Scottish higher rate”.

(4) The amendments made by this paragraph have effect in relation to the tax year appointed by the Treasury under section 25(5) of the Scotland Act 2012 and subsequent tax years.

16 (1) The Scotland Act 1998 is amended as follows.

(2) In section 80C (power to set Scottish rate for Scottish taxpayers), for subsection (2) substitute—

“(2) See section 6A of the Income Tax Act 2007 for provision about the calculation of those rates and section 11A of that Act for provision about the income charged at those rates.”

(3) Section 80G (supplemental powers to modify enactments) is amended in accordance with sub-paragraphs (4) to (8).

(4) For subsection (1) substitute—

“(1) The Treasury may by order modify section 11A of the Income Tax Act 2007 (income charged at the Scottish basic, higher and additional rates) for the purpose of altering—

(a) the definition of the income which is charged to income tax at the rates provided for under the section, or

(b) the application of the section in relation to a particular class of income which is so charged.

(1A) The Treasury may by order modify any enactment not contained in Chapter 2 of Part 2 of the Income Tax Act 2007 (rates at which income tax is charged) so that it makes provision, in relation to a Scottish taxpayer, by reference to the Scottish basic rate, the Scottish higher rate or the Scottish additional rate, instead of the basic rate, the higher rate or the additional rate.

(1B) If the Treasury consider it necessary or expedient to do so, they may by order provide that—

(a) the Scottish rate set by the Parliament for a tax year, or

(b) the fact that the Scottish rate has not been so set for a tax year,

does not require any change in the amounts repayable or deductible under PAYE regulations between the beginning of that year and such later date as may be specified in the order.”

(5) In subsection (2), for the words from “with—” to the end substitute “with an order under subsection (1), (1A) or (1B)”.

(6) Omit subsection (3).

(7) After subsection (4) insert—

“(5) The power under subsection (1) does not include power to provide that any income which is—

(a) savings income, or

(b) dividend income which would otherwise be charged to income tax at a rate provided for under section 13 of the Income Tax Act 2007,

is income which is charged to income tax at a rate provided for under section 11A of that Act.”

(8) In section 110 (Scottish taxpayers for social security purposes), in subsection (2)—

(a) for “basic rate” substitute “Scottish basic rate, Scottish higher rate or Scottish additional rate (within the meaning of the Income Tax Acts)”, and

(b) omit the words from “(instead of” to the end.

(9) Schedule 7 (procedure for subordinate legislation) is amended in accordance with sub-paragraphs (10) and (11).

(10) In paragraph 1(2)—

(a) omit the entry for section 79, and

(b) at the appropriate place insert—

“Section 80G(1), (1A) or (2)	Type E
Section 80G(1B)	Type K”.

(11) At the end of paragraph 1, omit the Note relating to the entry for section 79.

(12) Sub-paragraph (8) comes into force on such day as the Secretary of State may by order made by statutory instrument appoint.

(13) Sub-paragraphs (10)(a) and (11) come into force on such day as the Treasury may by order appoint.

17 In consequence of the amendments made by this Schedule, in the Scotland Act 2012 omit—

(a) section 26 (income tax for Scottish taxpayers),

(b) paragraph 1(2)(a) and (b) of Schedule 2 (amendments to section 110(2) of the Scotland Act 1998), and

(c) paragraph 1(4) of that Schedule (amendments to Schedule 7 to the Scotland Act 1998 relating to section 80G of that Act).