ICAS Scottish tax policy work: A summary

Justine Riccomini sets out a brief note on our involvement with Scottish tax policy and consultations since the Scottish Budget 2024.

Background to Scottish taxes

We’ve been a key player and trusted stakeholder in policy discussions with the Scottish government and Scottish Parliament since the commencement of the devolution process of tax powers began in 1998.

Since the first moves were made in Scotland Act 1998, we’ve been advocating on behalf of members for close working between the governments of the UK and Scotland and rational, sustainable outcomes in taxation which citizens and businesses could both understand and comply with.

The devolution journey in Scotland began with powers for the Scottish government to raise income tax on non-savings and non-dividend income (a partially devolved form of income tax), but this has since evolved into a small number of additional fully devolved national taxes such as Land and Buildings Transaction Tax (LBTT) and the beginnings of some locally levied taxes such as the Visitor Levy (or Tourist Tax). Note that where the term “Tax” is used, this generally refers to a national fully devolved tax which is collected and administered by Revenue Scotland. Where the term “levy” is used, this generally refers to a local tax which is collected and administered by Local Authorities at their own discretion, once legislated for by the Scottish Government. The exception to this is the Scottish Building Safety Levy, which is a national tax aiming to support the Cladding Remediation Programme in Scotland. 

Latest developments

Over the last six months or so, a few more developments have unfolded which are covered below, and there is also currently an open consultation on the potential Scottish Cruise Ship Levy which we’ll be responding to, which closes on 30 May 2025 and follows the Visitor Levy (Scotland) Act which became law in 2024.

Scottish Aggregates Tax became law in 2024 but the details of the tax and how it’ll apply to such matters as cross-border arrangements are still being worked out.  We’ve been present at all discussions on this tax over the last few years, setting out concerns around avoidance, cross-border compliance and illegal quarrying and movements of aggregate falling under the radar by rogue operators which are undermining competition, affecting markets and causing problems for legitimate aggregates producers.

Scottish Building Safety Levy (SBSL) is a work in progress and we’ve been sitting on the Expert Advisory Group for this tax since talks began around 18 months ago. The Scottish Building Safety Levy is a proposed tax aimed at improving building safety in Scotland, particularly in response to issues like unsafe cladding. It’ll be an additional charge on new residential developments, paid by housebuilders, to help fund the remediation of cladding in existing buildings. The levy is similar to the Building Safety Levy being introduced in England and is part of the Scottish Government's efforts to enhance building safety following incidents like the Grenfell tragedy. The revenue generated will support the Cladding Remediation Programme, addressing safety concerns in residential properties. A consultation process is underway to gather views on how the levy should be structured and operate within the distinct characteristics of the Scottish housing market. 

Our representations at the round table meetings of the expert advisory group and our written submission have been around the locus and structure of the tax, and the tax point at which a tax might be triggered.  We’ve called for a sunset clause to be in effect given that it’s assumed the SBSL will result in remediation works over a given timeframe (currently assumed to be 15 years) and once remediation is complete, there will no longer be a need for the tax. The main concerns from housebuilders are around exemptions, the rate of the levy and the effect on profit margins and whether the cost of the levy will be passed on to purchasers.

Scottish Visitor Levy was legislated for in 2024 and local authorities can avail themselves of the right to charge the levy on accommodation providers within their boundary. The local authority can choose the rate and the method of the charge. Visit Scotland was commissioned to produce guidance on the levy, but we’ve raised a query with HMRC and Scottish government on the way in which the VAT interacts with the Visitor Levy. Meetings are taking place with Scottish government officials and HMRC on this matter in May and June 2025 so that a clear and unambiguous position can be set out.

Scottish Cruise Ship Levy is a potential new tax following in the wake of the introduction of the Scottish Visitor Levy in 2024. Discussions are underway which we’re involved in, and the first consultation closes on 30 May 2025 – We’ll be submitting a response.  

The Scottish Parliament also called for evidence on the Scottish Budget process following the last Budget in December 2024.  ICAS responded to this and a committee member of the Devolved Taxes Committee of ICAS, economist Prof. David Bell also gave evidence at the Scottish Parliament in his own right on the subject following the closing date of the evidence submissions. Professor Bell’s evidence aligns with our policy positions on this matter.

If you’ve spotted a tax anomaly that is producing an inequitable result or getting in the way of doing business, why not share it with our tax team?

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