Scottish taxpayer and split tax year

[etf]

I've read a few articles on the introduction of the Scottish Rate of Income Tax (SRIT) which suggest that unlike residence in the UK there are no rules to take account of the special circumstances that apply in the first and last year of residence i.e. SRIT may apply to income arising in the overseas part of a split year. Has anyone established what happens in an example such as that shown below?:

Jimmy Campbell has been non-UK resident for UK tax purposes for many years. On 31 August 2016 his overseas employment in Dubai comes to an end and he returns to his Glasgow home to commence an employment there on 1 September 2016. Under the UK Statutory Residence Test (SRT) Jimmy is UK resident for 2016/17, but he qualifies for split year treatment with the UK part of the year commencing on 1 September 2016. His only worldwide income comes from his employments for which he earns UK£3,000 per month. What UK and Scottish income tax will Jimmy have to pay for 2016/17?

KR

etf

[maths]

My understanding as follows:

You can only be a Scottish taxpayer for a tax year in which you are UK resident under the SRT.

Where an individual arrives part way through a tax year and under the SRT split year treatment applies, he will become a Scottish taxpayer but only from that date applying for split year treatment. Hence, no Scottish income tax to pay on monies earned pre acquiring UK residence.

[etf]

Thanks Maths.

I have copied below one of the articles (taken from Oct 15 Tax Adviser article) that I read which made me post this question:

First, it will be seen that, as one does for residence in the UK, one determines whether an individual is a Scottish taxpayer for a whole fiscal year. Unlike residence in the UK, however, there are no split year rules to take account of the special circumstances that apply in the first and last year of ‘residence’. The result is that the SRIT may apply to income arising in the overseas part of a split year


Having received your reply, I've undertaken some further research and found the following advice (KPMG) which supports your view:

As ‘Scottish Taxpayer’ status determines only the rates at which
UK income tax is paid on relevant income, and does not equate
to a new concept of ‘Scottish tax residence’, internationally
mobile individuals who are ‘Scottish Taxpayers’ for a particular
tax year would not be chargeable on non-UK source income
which arises before UK residence commences, or after it
ceases, on a ‘split year’ basis.


I have already put in a call to HMRC and will re-post if their feedback adds anything to this subject matter.

KR

etf

[bd6759]

TheKPMG advice woud appear to be spot on. The scottish rate is not a new tax: it is just a rate of tax. There has to be an underlying libality to UK tax.

[etf]

I hope you are correct!

As an aside, the Expatriate Tax and NICs forum which was looking at issues such as this one (see October 2015 minutes) seems to have ground to a halt. They were supposed to meet in April 2016, but I haven't seen anything published to suggest that meeting went ahead.

KR

etf

[maths]

First, it will be seen that, as one does for residence in the UK, one determines whether an individual is a Scottish taxpayer for a whole fiscal year. Unlike residence in the UK, however, there are no split year rules to take account of the special circumstances that apply in the first and last year of ‘residence’. The result is that the SRIT may apply to income arising in the overseas part of a split year

This is incorrect in my opinion.

The Scottish rate of income tax is just this. There is no fundamental change to the underlying principles set out in the SRT legislation.

Hence, tax years can continue to be split for "UK" tax purposes.

Having established that split year treatment applies, under the SRT, this dictates whether income arising before or after residence acquisition/cessation falls within the charge to income tax. Only then does one look at whether the taxpayer is subject to the Scottish income tax rate on the income which is within the charge to income tax.

[etf]

Section 3.5 of the CIOT's response to HMRC's technical note (see address below) suggested it is a grey area:

https://www.tax.org.uk/.../150731%20Tec ... %20-%20CIO..

etf

[etf]

HMRC's promised 7 day call back did not materialise and so I chased again today (doubtless another gong will be awarded shortly to those responsible).

HMRC's advice concurs with Maths/KPMG i.e. SRIT should not apply on overseas income in the overseas part of a split tax year.

KR

etf

[etf]

I've established that the Expat Tax and NICs forum is still alive, but the minutes of April's meeting are still not available to the public.

If Moira Stewart was correct in stating that "tax doesn't have to be taxing" why approximately 5 months after the meeting are the minutes unpublished? I could suggest, so the large firms who attend can make best use of the information they glean from these meetings, but that would be cynical of me.