‘Take care over power share’ – plea from campaigners for those on low incomes

Commenting on tax and benefits proposals made by the Smith Commission today, Joanne Walker, Scottish Technical Officer for the Low Incomes Tax Reform Group, said:

“The Smith Commission sets out a vision of a brave new world in which tax and welfare powers are shared between the Scottish and UK governments. While this offers potential benefits it could mean complexity and confusion if not managed properly. There will need to be unprecedented close working between Holyrood and Westminster to ensure that those on low incomes do not fall between the cracks in the system.

“Under today’s agreement, the Scottish Parliament will have further powers to determine rates and bands for income tax on earned income. Some taxpayers will face complication and confusion with savings income subject to UK rates and bands and earned income subject to Scottish rates and bands.

“The interactions between a shared income tax and welfare benefits, some of which are devolved and some of which are reserved, could have unintended consequences. An individual may have to deal with a shared income tax, reserved national insurance contributions, a reserved benefit such as Universal Credit, and devolved benefits such as Disability Living Allowance. It will be essential that such as individual has one port of call for advice and queries on their tax and benefit entitlements.

“There is also the scenario that two individuals, earning the same gross wage, could end up with different Universal Credit entitlement, if one pays Scottish rates on their earned income and the other pays UK rates, and these are different.

“Care needs to be taken around how Scottish variations to Universal Credit are co-ordinated with the national scheme so that the people who should actually receive the Universal Credit are not impeded. The administration of these variations and clarity of communication about them will be key to their success.

“The challenges will be for UK and Scottish Governments to work together, to consider interactions when making changes, and to ensure clarity of message for those individuals who will be impacted by the changes.”

Notes for editors

1.       The Low Incomes Tax Reform Group (LITRG)

LITRG is an initiative of the Chartered Institute of Taxation to give a voice to the unrepresented. Since 1998 LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes.

2.       The Chartered Institute of Taxation (CIOT)

The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.

The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries. The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.

The CIOT’s 17,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.