Many may be aware that the Scottish Rate of Income Tax will take effect for Scottish taxpayers from 6th April 2016, however there is less awareness of what will define an individual as a Scottish taxpayer.
HM Revenue & Customs published a guidance note “Scottish Rate of Income Tax – Technical Guidance on Scottish Taxpayer Status” in October 2015 to address this.
For many taxpayers, whether or not they will be classed as a Scottish taxpayer will be simple – they will either live in Scotland and therefore be a Scottish taxpayer or live elsewhere in the UK and not be a Scottish taxpayer.
The position may not, however, always be straightforward and certain tests must be considered when determining Scottish taxpayer status.
Firstly, the individual must be UK resident for tax purposes in the tax year concerned. They will then be deemed to be a Scottish taxpayer for that tax year if, during that year, they either have a “close connection” to Scotland or, where there is no “close connection” to Scotland or any other part of the UK, they are present in Scotland at midnight on at least as many days during the tax year as they are present elsewhere in the UK. Scottish parliamentarians will also be deemed to hold Scottish taxpayer status.
A “close connection” to Scotland is established by either having a single place of residence which is located in Scotland or, where the individual has more than one place of residence, having their main place of residence in Scotland for at least as much of the tax year as it has been in any other single country in the UK.
A place of residence is considered by HM Revenue and Customs to be the “place that a reasonable onlooker, with knowledge of the material facts, would regard as the dwelling in which that person habitually lives: in other words his or her home”. Where an individual has more complex living arrangements it may be necessary to provide evidence to demonstrate their place of residence.
National identity, location of work, location of income source (pension/salary from a Scottish entity) and travelling in Scotland will not cause an individual to be a Scottish taxpayer if their place of residence is outside Scotland.
HM Revenue and Customs will issue Scottish tax codes where relevant and employers should only apply a Scottish tax code if HM Revenue and Customs tell them to. It is the responsibility of the individual taxpayer to inform HM Revenue and Customs of any changes to their circumstances.
*Rennie Welch LLP accepts no liability on the basis of this article and detailed advice, taking into account individual circumstances, should be obtained. If you require advice in connection with any tax matter, please contact Lynn Miller at Rennie Welch on 01573 224391.