Finance secretary calls on Scottish parliament to get behind "robust" new anti-tax avoidance rules

Out-Law News | 21 May 2014 | 9:58 am | 2 min. read

The Scottish finance secretary has called on the country's parliament to back a "robust and distinctive" approach to tackling tax avoidance alongside the introduction of new devolved taxes.

Ahead of the first parliamentary debate on the new Revenue Scotland and Tax Powers Bill, John Swinney said that the new regime would establish a more cost-effective framework for collecting and managing Scottish taxes. The new land and buildings transaction tax (LBTT) and landfill tax will replace the existing UK-wide stamp duty land tax (SDLT) and landfill tax in Scotland from 1 April 2015.

"The Bill is an important milestone which provides an opportunity to put in place a distinctive Scottish approach to taxation founded on Adam Smith's four principles – that taxes should be proportionate to the ability to pay, that there must be certainty, convenience for the taxpayer and efficiency," he said.

"These principles are the golden thread which runs through the Bill, and which we will continue to build on as we prepare for the implementation of the devolved taxes on 1 April 2015," he said.

The Revenue Scotland and Tax Powers Bill is one of three pieces of legislation introduced under the Scotland Act 2012, which gave the Scottish parliament powers to both set and collect a portion of its own revenue from April 2015. It will establish Revenue Scotland as the tax authority responsible for collecting and managing the new devolved LBTT and landfill tax; as well as any future new devolved taxes. The Bill also contains a "robust and distinctive" new anti avoidance rule, intended to counteract artificial arrangements designed to gain a tax advantage.

As drafted, this new rule is far stricter than the general anti-abuse rule (GAAR) that has applied to UK taxes since last year. The UK GAAR is only designed to prevent taxpayers from receiving tax advantages as a result of tax arrangements that are explicitly abusive, defined as arrangements that UK tax authority HM Revenue and Customs (HMRC) can show "cannot be reasonably regarded as a reasonable course of action".

Swinney said that implementing a wider GAAR aimed at tackling 'avoidance' rather than 'abusive' arrangements would allow Revenue Scotland to "combat tax avoidance as vigorously and effectively as possible".

Scotland-based tax expert Karen Davidson of Pinsent Masons, the law firm behind Out-Law.com, previously said that judging where the "line of acceptability" lay in relation to tax planning arrangements would be no easy task for Revenue Scotland. Although "few would argue" that the new body should not have the power to counteract transactions that crossed that line, the introduction of a UK-style independent panel would provide more protection for taxpayers, she said. The UK GAAR is overseen by a GAAR Advisory Panel which sets guidance and provides non-binding opinions on cases.

The existing UK landfill tax and stamp duty land tax (SDLT) will be 'switched off' in Scotland on 1 April 2015, together with a corresponding reduction in the 'block grant' Scotland receives from Westminster. These taxes are due to be replaced with the new landfill tax, which will apply on the disposal of waste to landfill; and the new LBTT, which will apply to the purchase or leasing of land and buildings.