Budget 2016: Comment

Tax changes pose questions for Scottish government

PwC David GlenWhile it will take a day or two for the full impact to be measured in Scotland due to devolution, this was a Budget that certainly showed we are living in interesting times.

The whisky industry will once again raise a glass to the Chancellor for holding duty, though some in the soft drinks industries may also need a drop of the hard stuff after the announcement of the Sugar Tax, which will also apply to Scotland as the Chancellor introduced it under Excise.

If he had introduced it via health or other initiatives then there was a risk that it would not have been implemented across the UK due to devolution – and the question now is what will the Scottish Government do with it as the money is not ringfenced north of the border, unlike England where it will be used to boost sport in primary schools. Part of his budget for the next generation perhaps?

Indeed, it is one of the devolved matters that will be the main issue for the Scottish Government – either this one or the one formed after the upcoming election – that of the proposed Income Tax changes.

BudgetpwcWhile the £11,500 limit is a Westminster matter, there is flexibility for the Scottish Government with regards to the £45,000 sum and many will be watching to see how they will be impacted as the Scottish Rate of Income Tax comes into play in April 2017.

While it would be a popular move to keep the change, it would have a knock-on effect to the Scottish budget, particularly in light of recent proposed changes to the Council Tax in the next Parliament.

One area which will surely be welcomed was around oil and gas in the North Sea.

The Petroleum Revenue Tax (PRT) being “effectively abolished” and the existing supplementary charge for oil companies being halved to 10% will be a boost to the North Sea industry. There is potential for this relief to be invested into exploration – something that was missing in mentions from the budget.

This was a budget that tried to emphasise benefits for all of Scotland – from mentioning the city deals of Edinburgh and Inverness to the V&A in Dundee – but the question will remain of how much the bigger picture impacts on the country and many will be waiting to see how the Scottish Government reacts to George Osborne’s announcements.

And there were boosts for our growing Scottish digital economy too. The Capital Gains Tax and Corporation Tax cuts will be welcomed but the clampdown on VAT-avoiding online dealers will give cheers to those selling online and hopefully level the playing field for the SMEs developing digitally.

David Glen is a partner and head of tax at PwC Scotland

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