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Devolved taxes and brexit

ICAEW Tax Faculty provides analysis of the announcements relating to devolved taxes in the Autumn Budget 2017.

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Download a PDF of the Tax Faculty's summary of the announcements on tax and related matters in the Autumn Budget 2017

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Land transaction taxes

Tax devolution is now well under way throughout the UK. In April 2018, for example, Wales will replace SDLT with its own equivalent land transaction tax (LTT), following on from Scotland’s example in 2015. The rates for LTT were announced only last month and have some differences to the SDLT rates, for example the threshold above which you start paying LTT is set at £150,000 rather than £125,000 for SDLT. However, the announcement on 22 November 2017 of a SDLT exemption of £300,000 for first time buyers highlights one of the difficulties faced by the devolved administrations in running their own taxes – how do they respond to changes made at the UK level? Will Wales and Scotland be forced to follow suit and introduce such an exemption, probably blowing gaping holes in their budget calculations? Interestingly, although the rates and bands of SDLT and LTT are different, the tax on a £300,000 is exactly the same – namely £5,000. So buying your first home in Wales could cost you up to £5,000 more than buying a home in England. That’s the devolution conundrum for you.

Northern Ireland rate of CT

The government has reaffirmed, once again, its commitment to the introduction of a Northern Ireland rate of corporation tax (which we assume will be 12.5% to match the Republic of Ireland but this is not confirmed and could be different). It is considering an announcement in 2018/19 on implementing the Northern Ireland rate but it remains contingent on the Northern Ireland Executive being able to show its finances are on a sustainable footing.

Scotland: VAT and emergency services

In Scotland, the government will legislate to introduce a VAT exemption for the Scottish Police and Fire Services. In 2013, the Scottish government took the decision to merge the local services into a national one, but in the process the ability to have any VAT refunded on costs was lost as this is only available to locally controlled forces, a situation which continues in England and Wales. Since 2013 this has cost the Scottish national services £140m.

Scotland: rural fuel duty rebate

The rural fuel duty rebate scheme for the Scottish Islands will be extended until 2023. The scheme allows for a 5p per litre reduction in the price of fuel and from a quick ‘google’ it looks like this helps to keep fuel prices on a par with those on the mainland.