Payroll insight
Section 80D taxpayer definition (1) For any tax year, a Scottish taxpayer is an individual (T) — (a) who is resident in the UK for income tax purposes for that year (see Schedule 45 to the Finance Act 2013) and (b) who, for that year, meets condition A, B or C. (2) T meets condition A if T has a close connection with Scotland (see section 80E). (3) T meets condition B if— (a) T does not have a close connection with England, Wales or Northern Ireland (see section 80E), and (b) T spends more days of that year in Scotland than in any other part of the UK (see section 80F). (4) T meets condition C if, for the whole or any part of the year, T is— (a) a member of Parliament for a constituency in Scotland, (b) a member of the European Parliament for Scotland, or (c) a member of the Scottish Parliament. (4A) Subsection (1) does not apply if T is a Welsh parliamentarian for the whole or any part of the year (see section 80DA). (4B) For the purposes of subsection (4A) and section 80DA, T is a Welsh parliamentarian if T is a member as described in any of paragraphs (a) to (c) of section 116E (4) of the Government of Wales Act 2006 (definition of a Welsh taxpayer). (5) In this Chapter “the UK” means the United Kingdom.
(LT) – from April 2015. These are small revenue-yielding taxes for which Revenue Scotland is responsible for administering and collecting. Further devolved taxes are in the pipeline. Income tax is not fully devolved to Scotland, but partially devolved, which has resulted in the Scottish taxpayer’s income tax computation being divided into two: ● non-savings/non-dividend income (NSNDI) (i.e. income from employment, pensions, profits from a trade and taxable state benefits) which gets paid straight to Scotland by the UK government, and ● savings and dividend income (SDI) (i.e. investment income) which is reserved to the UK and the tax retained by Westminster. Both NSNDI and SDI are fully administered and collected by HMRC. The tax base (i.e. what counts as income for income tax purposes) as well as the UK personal allowance (UKPA), currently set at £12,500 per annum for 2019–20, are both reserved matters (i.e. controlled by the UK government, not Scotland). The Scottish government is only allowed to change the rates and bands of Scottish income tax (SIT) for Scottish taxpayers. In Wales, the UK government devolved some tax-raising powers to the NAW, following the Wales Act 2014. As a result, SDLT and LT are now land transaction tax and landfill disposals tax respectively, operational from May 2017 and April 2018 respectively. Both these fully devolved taxes are administered and collected by the Welsh Revenue Authority. Further devolved taxes are in the pipeline. As far as Welsh income tax goes, a combination of the Wales Acts 2014 and 2017 results in Wales having something similar to what Scotland had under the Scotland Act 2012 provisions. In other words, the UK government reduces each of the three income tax bands by ten percentage points and the NAW determines what it will charge. This partial devolution of NSNDI income tax is being introduced from April 2019. Wales, like Scotland, has no power over the UKPA and
is permitted only to decide the rates (not the bands) of tax at present. The NAW has decided that for 2019–20, the rates of income tax payable by Welsh taxpayers will be the same as those payable in England and NI. Welsh income tax will come directly to Wales and is also administered and collected by HMRC. To illustrate what is happening across the four countries from 2019–20, please see the table opposite, which assumes the taxpayer is entitled to a full UKPA of £12,500. The key thing to remember is that Scottish and Welsh taxpayers are categorised by where they live (and, thus, so are English and NI taxpayers – who are referred to as ‘rest of UK’). In Scotland, the definition can be found at section 80D of the Scotland Act 2012; and in Wales, at sections 116E–116H of the Government of Wales Act 2006. For the statutory definition of a Scottish taxpayer see the panel ‘Section 80D taxpayer definition’ above. (The definition of a Welsh taxpayer is essentially the same, but in a Welsh context.) Who qualifies as a Scottish and Welsh taxpayer?
HMRC is responsible for categorising taxpayers, and so it is not up to the employer to write to HMRC and tell them – this is between HMRC and each individual taxpayer. However, employers should do their utmost to ensure that all employees’ addresses are up to date in the software and that they are assisting in the process in that way. The right taxes must end up in the right country – which is essential for public funding purposes. Every day counts Each of the definitions places ultimate reliance on day counting if all else fails. A crucial change will take place in Scottish day-counting rules from 6 April 2019. This change, which could cause some confusion is that until 6 April 2019 the Scottish taxpayer definition required day- counting to be done on a ‘days in Scotland v days in rest of UK’ basis. However, the Scottish legislation has been amended so that the Scottish and Welsh day-counting definitions are the same after the Welsh legislation comes into force, from 6 April 2019. Thereafter, they will both require day-counting to be done on a ‘days in Scotland/Wales v days spent in each individual jurisdiction’ basis. So, from 6 April, if Johnny the salesman spends 120 days in Scotland, and spends 90 days travelling in England, 55 days in NI and 100 days travelling in Wales, he is still a Scottish taxpayer even though he has spent more time outside of Scotland than
...crucial distinction when planning work, keeping records and handling queries from employees
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Issue 49 | April 2019
| Professional in Payroll, Pensions and Reward |
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