Written evidence submitted by The Institute
of Chartered Accountants of Scotland
INTRODUCTION
1. The Institute of Chartered Accountants of
Scotland welcomes the opportunity to submit evidence to the Scottish
Affairs Committee on the Scotland Bill 2010.
2. The Institute is the first incorporated professional
accountancy body in the world. The Institute's Charter requires
it to act primarily in the public interest, and our responses
to consultations are therefore intended to place the general public
interest first. Our Charter also requires us to represent our
members' views and protect their interests, but in the rare cases
where these are at odds with the public interest, it is the public
interest which must be paramount.
3. The Institute is apolitical in its responses
and considers merely the practicalities of the implementation
and the technicalities of any proposed legislation. Our membership
includes people covering the whole political spectrum.
4. In our response to the questions in the call
for evidence, we cross-reference our answer to question 3 on the
financial and fiscal implications of the Bill to the written evidence
we submitted to the Scotland Bill Committee of the Scottish Parliament.
We believe it is appropriate for us to provide the Scottish Affairs
Committee, in full, with the written evidence we submitted to
the Scotland Bill Committee. We gave further oral evidence to
the Scotland Bill Committee on 25 January 2011 on the proposals
within the Scotland Bill on taxation and corporate insolvency
procedure.
5. We were actively involved in the work of the
Commission on Scottish Devolution—the Calman Commission—providing
both written and oral evidence over the period of its review.
We are also actively involved in the process instigated by the
UK Government to develop a detailed framework for implementing
the proposals on income tax arising from the work of the Calman
Commission, now included in the Scotland Bill 2010. We are represented
on the High Level Implementation Group which is jointly chaired
by the Exchequer Secretary to the Treasury and the Secretary of
State for Scotland.
6. Along with the Chartered Institute of Taxation
(CIOT), we have encouraged debate on the tax proposals. On 30
September 2010, the Institute hosted a roundtable event with CIOT
at the Scottish Parliament. This event was an opportunity for
key stakeholders, including accountants, tax advisors, politicians
and civil servants, to consider the wide range of practical issues
which need to be addressed. The notes from this meeting are included
within the evidence we submitted to the Scotland Bill Committee
of the Scottish Parliament.
KEY POINTS
7. Our engagement with this reform process is
focused around three key issues:
— The
proposals on the introduction of a Scottish rate of income tax
which are to be taken forward by the Scotland Bill.
Our comments on income tax
comprise the majority of our response to question 3 of the call
for evidence. We recommend that the definition of "Scottish
taxpayer" in the Bill is reconsidered and a statutory definition
introduced which will give greater certainty to all. Certainty
is needed as to who is a Scottish taxpayer in order to keep the
costs of compliance as low as possible.
The welfare reform programme
currently being taken forward by the UK Government will have a
direct bearing on the implementation of a Scottish rate of income
tax. The welfare reforms are expected to devolve elements of the
welfare system which will add complexity. A clear plan is needed
as to how the reserved and devolved elements of the tax system
and reserved and devolved elements of the welfare system will
interact and operate in a cohesive manner.
— The
proposal to re-reserve powers to set procedure for corporate insolvency,
which is to be taken forward by the Scotland Bill.
We believe that the re-reservation
of responsibility for corporate insolvency procedure, excluding
Receivership, is beneficial as it will ensure consistency throughout
the UK. Scotland will also benefit from legislative change being
introduced at the same pace as the rest of the UK. Our detailed
comments on corporate insolvency are set out in our response to
question 11 of the Scotland Bill Committee's call for evidence.
— The
desirability of a single definition of "charity", including
consistent "charitable purposes", across the UK for
both regulatory and tax purposes.
This matter is taken up within
the White Paper Strengthening Scotland's Future and we
support the approach which has been set out therein, including
the intention of seeking change through engagement with the Scottish
Government and consent for any changes from the Scottish Parliament.
We believe it is appropriate that reform of the law in this area
should be dealt with separately from the Scotland Bill.
RESPONSES TO
THE SCOTTISH
AFFAIRS COMMITTEE'S
KEY QUESTIONS
Question 1: Which of the recommendations of
the Calman Commission on Scottish Devolution are not implemented
by the Bill, and why?
Response
8. The Calman Commission made the following two
recommendations about charities:
— There
should be a single definition of each of the expressions of "charity"
and "charitable" purposes throughout the United Kingdom.
This should be enacted with the consent of the Scottish Parliament.
(Final report recommendation 5.2)
— A charity
duly registered in one part of the United Kingdom should be able
to conduct its charitable activities in the UK without being required
to register separately in the latter part and without being subject
to the reporting and accounting requirements of the regulator
in that part. (Final report recommendation 5.3)
9. We support these recommendations and the UK
Government's intention, as stated in Strengthening Scotland's
Future, to examine these issues as part of a planned review
of the Charities Act 2006 (which applies in England and Wales)
and agree with plans to involve charities across the UK, the Scottish
Government and the Scottish Parliament in the review. The changes
to the law which would be required to address these recommendations
are a matter for charity law and therefore we consider that it
is entirely appropriate that these recommendations are not implemented
through the Scotland Bill.
10. We recommend that any discussions in this
area include the Northern Ireland Executive. The Charities Act
(Northern Ireland) 2008 includes a further expression of "charity"
and "charitable purposes": this is currently under review
with consideration being given to aligning the definition with
the Charities Act 2006.
11. Should agreement be reached among all UK
jurisdictions on a single UK-wide definition further consideration
will be needed as to how the new definition is brought into statute.
12. We support the Calman Commission's recommendations
for two key reasons. Firstly, we believe that charities across
the UK should have the same access to charity tax reliefs and
a single definition of each of the expressions of "charity"
and "charitable" purposes would give certainty to charities
about their tax status. Secondly, we believe that the regulation
by more than one charity regulator is an administrative burden
which does not appear to us to provide any additional comfort
to the public about the stewardship of charitable funds or the
achievement of charities' objectives.
Question 2: What provisions are made in the
Bill, which were not recommended or considered by the Commission
on Scottish Devolution?
Response
13. We understand that there are a number of
provisions, highlighted in Strengthening Scotland's Future,
which deal with issues which were not considered or recommended
by the Calman Commission. We have not included any comments on
these matters within this submission.
Question 3: What are the fiscal and financial
implications of the provisions in the Bill for Scotland?
Response
14. Our response to this question cross-refers
as follows to our submission to the Scotland Bill Committee, which
is included as an Appendix. Our views on:
— financial
accountability are set out in question 1;
— the
definition of a "Scottish taxpayer", the potential costs
of establishing a register of Scottish payers, the importance
of the tax being accepted are set out in question 3. We also highlight
a number of complex issues which will need to be managed;
— powers
to introduce new forms of taxation are set out in question 5;
and
— the
regulatory impact assessment process are set out in question 7.
Question 4: What further provisions could/should
be included in the Bill in order to further amend and develop
the Scotland Act 1998?
Response
15. We have no suggestions for additional provisions
to be included in the Scotland Bill.
January 2011
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