Devolved taxes: a policy framework

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Closes 6 Jun 2019


1. Do you welcome the use of the DTC as an annual tax forum and agree with its stated purpose?

Devolved Tax Collaborative

In 2013, the Scottish Government established the Devolved Tax Collaborative (“DTC”) as a means of bringing together the tax advisory community and others with an interest in tax. These events continued for around two years and were warmly welcomed by stakeholders.

Since the implementation of the devolved taxes in April 2015, the DTC has been replaced by Revenue Scotland’s LBTT & SLfT Fora. Revenue Scotland have used these events to provide updates on their performance, the performance of the taxes, and to discuss technical and practical issues. For its part, the Scottish Government also conducts ongoing engagement with stakeholders, including ministerial engagement in advance of annual Budgets.

The move from the DTC to tax specific forums means there has been less opportunity for wider discussion on tax policy issues. The Scottish Government will therefore propose to reconvene annual meetings of the Devolved Tax collaborative

These events will allow the Scottish Government to set out future tax policy priorities and provide updates on emerging tax proposals. It will also allow the Scottish Government to listen to feedback from a broad range of businesses, interest groups and individuals before progressing these proposals. Attendees will be encouraged to contribute to discussions on the effectiveness of the tax system, as well as to comment and make proposals on emerging policy priorities.

2. Do you have any other preferences as to how the Scottish Government should carry out engagement on the fully devolved taxes?

3. Do you support the Scottish Government’s proposed approach to tax consultations, in particular consulting on issues collectively rather than on an individual basis?

Scottish Government approach to tax consultations

The Scottish Government has taken a collaborative and open approach to tax policy development in order to ensure tax policy is informed by a diverse range of views and to help taxpayers and the wider public to better understand why changes are being made. For example in 2017, the Scottish Government published a discussion paper on the future of income tax, followed by a number of roundtable events in

advance of the Scottish Budget, which was warmly welcomed by stakeholders.

With this in mind, open and extensive consultation and engagement throughout the policy and legislative cycle is a cornerstone of the Devolved Taxes Policy Framework.
The Scottish Government will publish a tax consultation on an annual or biennial basis (depending on the frequency of the cycle – see question at the end of section 4.5). Where possible, the consultation will seek views on a range of issues under consideration, rather than consulting on each on an individual basis. It will set out:

  • the range of tax measures the Scottish Government are exploring;
  • the policy objectives of those measures;
  • on what areas views are sought; and
  • an assessment of the likely impacts.

Different types of consultation and engagement will work better for different types of changes. In some instances, for example, in wider-reform of the tax system, the Scottish Government will hold events to encourage participation in the consultation and to provide further information. In other instances, it may be appropriate to consult informally with subject-matter experts or professional bodies, particularly if the changes are minor or technical in nature.

The Scottish Government will also, where possible, consult on draft legislation. If it is not possible to do so at the time of the tax consultation, there may be a second, shorter period of consultation specifically on the draft legislation.

4. What are your views on the proposed policy and legislative cycle?

Indicative timeline of cycle

5. What are your views on how frequent the cycle should occur - annually or every two years?

6. Do you consider the existing documents that are published, and the Scottish Government’s approach to drafting them, as a sufficient means of clarifying the intention and impacts of a policy?

Accompanying documents

As part of the existing legislative process in Scotland, the Scottish Parliament’s Standing Orders usually requires a policy memorandum, financial memorandum and explanatory note to be published alongside any new primary legislation (only a policy note is required for secondary legislation). These documents are intended to be read in tandem and together they offer more detailed commentary on the individual provisions and their objectives.

A key feature of providing taxpayers with certainty, resolving disputes and tackling avoidance is to make clear the policy intentions behind the relevant legislation. In drafting the accompanying documents, the Scottish Government’s aim is to set out clearly and in appropriate detail the intention of the policy and how the legislation is expected to work in practice. The objective of this approach is, amongst other things, to prevent tax avoidance from the outset through drafting clear legal provisions, supported by explanatory material setting out the intention behind the legislation, to ensure that tax is paid in the way that the Scottish Parliament had intended.

The Scottish Government also undertake various assessments as part of the policy making process. For example:

  • Equality Impact Assessments look at how policies impact on peoples, in particular, the process identifies the impact of policy on people who share certain 'protected characteristics': age, disability, sex, gender reassignment, sexual orientation, race and religion or belief.
    Business and Regulatory Impact Assessments are used to analyse the cost and benefits to businesses and the third sector of any proposed legislation or regulation, with the goal of using evidence to identify the proposal that best achieves policy objectives while minimising costs and burdens as much as possible.
    Data protection impact assessments must be completed for all policies or projects involving personal data and privacy. They help to identify and mitigate risks to privacy, and identify the ways the Scottish Government can effectively comply with data protection laws.

All of these documents are published on the Scottish Parliament website alongside any other documents considered during the passage of legislation. To improve accessibility, the Scottish Government will also publish links to the documents on the tax pages of its website. This will bring together in one place all information related to the fully devolved taxes and will ensure that the documents are readily available to taxpayers and Revenue Scotland, and also so that those overseeing disputes and appeals are able to easily refer to the information and to use it when making their decisions.

As noted earlier, the UK Government now publish Tax Information and Impact Notes alongside any legislation to provide a clear explanation of the policy objective, together with details of the tax impact on the exchequer, the economy, individuals, businesses, civil society organisations, as well as any equality or other specific impacts. In this respect, these notes provide a similar level of detail to the accompanying documents already published by the Scottish Government.

7. Do you agree with the Scottish Government’s approach to the circumstances set out in this section?


In every tax jurisdiction situations arise where changes may need to be made without advance consultation. For example, to tackle tax avoidance, to correct an anomaly or to respond quickly to changes in the economy. This often means that legislation is introduced with immediate effect, and in certain circumstances, it needs to be given retroactive effect.

Due to the operation of the Fiscal Framework and the interaction of the UK and Scottish Budget timetables, tax changes announced as part of the UK Autumn Budget can present challenges for the Scottish Government, particularly if the Scottish Government is required to legislate at short notice to protect revenues or prevent distortions in markets.
Changes may also need to be made without advance consultation where the effect of providing advance notice would pose a significant risk to revenues and markets, known as forestalling. This is particularly relevant for transactional taxes, such as LBTT, where taxpayers have more flexibility around bringing transactions forward, or as the case may be, delaying them until after a tax change has taken effect. As forestalling usually occurs to the benefit of the taxpayer, there will always be a loss in revenue. The Office of Budget Responsibility published the paper Forestalling ahead of property tax changes which provides a detailed analysis on the effects of forestalling, including case studies relevant to LBTT.

The Scottish Government will aim to make most changes to the devolved taxes through the policy and legislative cycle. However, in light of the above, it will be important to maintain provision for changes to be made immediately or following a shorter timescale and without substantial consultation.

The Scottish Government will consider the appropriate approach to consultation and pre-announcing tax changes on a case-by-case basis, carefully balancing the need for transparency and certainty with the risks associated with forestalling. In doing so, legislation will only be introduced at short notice if there are clear and justifiable reasons, and in such cases those reasons and rationale will be set out in the accompanying documents.