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Holyrood “more likely” to use new income tax powers

Scottish taxpayers look certain to be paying a different rate of income tax once further powers are resolved, it was claimed today.

A conference in Edinburgh heard that the Scottish government, which has not used its ability to vary income tax since devolution in 1999,  is “more likely” to use new tax powers that the parties are now lobbying to introduce.

The parliament will have control over the first 10% of income tax under the 2012 Scotland Act but this is likely to be extended once the Smith Commission has completed its inquiry.

The conference heard that the Smith Commission’s inquiry into further powers is considering proposals on tax, pensions and welfare. Of the submissions from key organisations none appeared to favour devolving pensions. Of the political parties, only the SNP wants full control.

Labour has proposed raising the variable income tax levy to 15% while the other parties would support all income tax being transferred. The Conservatives and Greens would add control over air passenger duty while the Lib Dems also want capital gains tax and inheritance tax under the control of Holryood. The SNP demands corporation tax and national insurance be added to the list of powers.

David Gordon, a consulting actuary with Towers Watson in Edinburgh, said once this is settled the Scottish government would be more likely to introduce a new rate of income tax. Companies and government bodies were now working together to establish who will be subject to the new Scottish income tax rates.

“Residency will be the key test,” he told delegates to the National Association of Pension Funds Scottish conference, “but people have more than one residence and the HMRC will making sure no one is cheating.”

The 2012 Act also transfers stamp duty to Scotland and it has been renamed the Land and Buildings Transaction Tax. One estate agent this week warned that it will impact adversely on the value of more expensive homes because homebuyers will be hit with huge increases in levy.

Conference chairman Graham Vidler opened the event at Dynamic Earth by noting that in a “revolutionary year” for pensions four million more people were saving for their retirement.

“People have got into the savings habit in a way we have not seen for decades,” he said.



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