Written evidence submitted by the federation
of Small Businesses
INTRODUCTION
The FSB is Scotland's largest direct-member business
organisation, representing around 20,000 members. The FSB campaigns
for an economic and social environment which allows small businesses
to grow and prosper.
We welcome the opportunity to submit evidence to
the Scottish Affairs Committee's inquiry.
With regard to the Scotland Bill, the FSB takes no
position on constitutional matters, our concern being more with
the quality and content of decisions, rather than where they are
made. We do broadly welcome the principle of linking the amount
Holyrood has to spend with Scotland's economic performance, as
this approach has the potential to help hard-wire economic considerations
into the decision-making process.
With this in mind, we comment only on the potential
impact of the Bill's implementation on business with regard to
income tax.
FISCAL AND
FINANCIAL IMPLICATIONS
The FSB notes the proposal to implement changes to
the block grant and income tax arrangements in Scotland via a
transitional period. This is a welcome safeguard in view of such
significant changes which carry a risk for businesses.
While the details of how the Scottish Income Tax
will be implemented are still under consideration, the FSB has
made the following recommendations:
— The
UK Government should work closely with the Scottish Government
to ensure a seamless transition to the new tax system.
— All
devolved agencies with direct contact with businesses, such as
Business Gateway, must be able to dispense accurate advice and
information in response to enquiries from employers. The Scottish
Government should ensure it is liaising with HMRC on this at an
early stage.
The FSB is currently represented on the Calman High-Level
Implementation Group and its technical sub-group on Income Tax.
The aim of our involvement is to help ensure that any changes—especially
those surrounding the introduction of a Scottish Income Tax—have
no or minimal cash and time costs for Scotland's small businesses.
However, recent feedback from our representative
on the technical sub-group suggests that there are several significant
issues, which will need to be resolved prior to implementation
if impact on business is to be kept to a minimum. Not least, it
is the intention of HMRC that a Scottish-domiciled person moving
outwith Scotland during the tax year will continue to be classed
as a Scottish tax payer for the remainder of that year and the
same will apply to employees moving to Scotland from other parts
of the UK. This will have implications on a far greater number
of businesses than might originally have been envisaged, as more
businesses will be required to navigate different tax codes and
accompanying processes (costs of software updates etc). We are
also concerned that the burden of identification may be shifted
from HMRC to businesses.
We will continue to contribute through these working
groups and are keen to maintain contact with the UK and Scottish
Governments, as well as other agencies, to ensure the new system
does not unduly burden employers.
January 2011
| 
