Citation, commencement and effect

1. —(1) These Regulations may be cited as the Scotland Act 2016 (Income Tax Consequential Amendments) Regulations 2017 and come into force on the day after the day on which they are made.

(2) The amendments made by these Regulations have effect in relation to the tax year appointed by the Treasury under section 13(15)( 2 ) of the Scotland Act 2016 and subsequent tax years.

Amendments to the Finance Act 2004

2.Part 4 (pension schemes etc.) of the Finance Act 2004( 3 ) is amended as follows.

3. —(1) Section 192( 4 ) (relief at source) is amended as follows.

(2) In subsection (4)—

(a) for “, the Scottish higher rate,” substitute “or” and

(b) omit “or the Scottish additional rate”.

(3) After subsection (4) insert —

“ (4A) Where—

(a) the individual is a Scottish taxpayer for the tax year,

(b) (apart from this section) income tax is chargeable in respect of any part of that individual’s total income for the tax year at a Scottish rate ( 5 ) , and

(c) that rate is higher than the Scottish basic rate for that year,

on the making of a claim, the Scottish basic rate limit, and any other Scottish rate limit for the tax year in the individual’s case, are increased by the amount of the contribution. ” .

4. —(1) Section 227( 6 ) (annual allowance charge) is amended as follows.

(2) In subsection (4A)—

(a) in paragraph (a) omit “or, in the case of a Scottish taxpayer, the Scottish basic rate”,

(b) in paragraph (b) omit, “or, in the case a Scottish taxpayer, the Scottish higher rate”, and

(c) in paragraph (c) omit, “or, in the case of a Scottish taxpayer, the Scottish additional rate”.

(3) At the end of subsection (4A) insert—

“ But subsection (4AA) applies in the case of a Scottish taxpayer. ” .

(4) After subsection (4A) insert—

“ (4AA) The appropriate rate for a Scottish taxpayer is—

(a) where the only Scottish rate is the Scottish basic rate (the “SBR”), that rate, or

(b) where there is more than one Scottish rate—

(i) the SBR in relation to so much (if any) of the chargeable amount as, when added to the individual’s reduced net income for the tax year, does not exceed the Scottish basic rate limit (“SBRL”) for the tax year,

(ii) the next highest rate after the SBR in relation to so much (if any) of the chargeable amount as, when so added, exceeds the SBRL for the tax year but does not exceed the rate limit for that rate for the tax year, and

(iii) where applicable, any other higher Scottish rate in relation to so much (if any) of the chargeable amount as, when so added, does not exceed the rate limit for that rate for the tax year. ” .

(5) For subsection (4C) substitute—

“ (4C) Where—

(a) the basic rate limit,

(b) the higher rate limit,

(c) the Scottish basic rate limit, or

(d) any other Scottish rate limit,

is (in accordance with section 192 of this Act or section 414 of ITA 2007) increased in the case of the individual, the references to the limit in subsections (4A) and (4AA) are to the limit as so increased. ” .

5. —(1) Section 237B( 7 ) (liability of scheme administrator) is amended as follows.

(2) In subsection (4)—

(a) in paragraph (a) omit—

(i) “or the Scottish additional rate”, and

(ii) “or, in the case of a Scottish taxpayer, the Scottish additional rate”,

(b) in paragraph (b) omit—

(i) “or the Scottish higher rate”, and

(ii) “or, in the case of a Scottish taxpayer, the Scottish higher rate,”, and

(c) in paragraph (c) omit “or, in the case of a Scottish taxpayer, the Scottish basic rate”.

(3) At the end of subsection (4) insert—

“ But subsection (4A) applies in the case of a Scottish taxpayer. ” .

(4) After subsection (4) insert—

“ (4A) In the case of a Scottish taxpayer, the “relevant rate” in subsection (3)(a) means—

(a) where the only Scottish rate is the Scottish basic rate, that rate;

(b) where there is more than one Scottish rate—

(i) the highest Scottish rate in relation to so much of the excess as does not exceed the amount (if any) on which tax is chargeable in the case of the individual at that rate by virtue of section 227(4AA)(b)(ii) or (iii),

(ii) the next highest Scottish rate in relation to so much of the excess as is not within sub-paragraph (i) and does not exceed the amount (if any) on which tax is so chargeable by virtue of section 227(4AA)(b)(i), (ii) or (iii),

(iii) if there is one, the next highest Scottish rate in relation to so much of the excess as is not within sub-paragraph (i) or (ii) and does not exceed the amount (if any) on which tax is so chargeable by virtue of section 227(4AA)(b)(i), (ii) or (iii),

and so on. ”

6. In section 279(1)( 8 ) (other definitions) after the definition of “pensionable age” insert—

“ “Scottish basic rate limit” means a rate limit set by the Scottish Parliament under section 80C(2A) of the Scotland Act 1998 for the purposes of determining the extent to which a Scottish taxpayer’s income is charged at the Scottish basic rate where a Scottish rate resolution under that Act has set more than one rate for the tax year. ” .

7. In section 280(2) (abbreviations and general index), omit the entries for “Scottish additional rate”, “Scottish basic rate” and “Scottish higher rate”.

Amendments to the Income Tax (Trading and Other Income) Act 2005

8. —(1)The Income Tax (Trading and Other Income) Act 2005( 9 ) is amended as follows.

(2) In section 669(3)( 10 ) (reduction in residuary income: inheritance tax on accrued income), in paragraph (a), for “additional rate or the higher rate” substitute “applicable rate”.

(3) After section 669(3) insert—

“ (3A) For the purposes of subsection (3), the “applicable rate” means—

(a) the additional rate,

(b) the higher rate, or

(c) in the case of a Scottish taxpayer, any Scottish rate above the Scottish basic rate. ” .

(4) In section 685A(3)( 11 ) (settlor-interested settlements) for “the Scottish additional rate” substitute “the highest Scottish rate”.

Amendments to the Finance (No.2) Act 2005

9. —(1)Section 7 of the Finance (No.2) Act 2005( 12 ) (charge to income tax on social security pension lump sum) is amended as follows.

(2) In subsection (5)—

(a) after the words “a charge under this section” insert “for a person who is not a Scottish tax payer in the applicable year of assessment”,

(b) in paragraph (c) omit “or, if P is a Scottish taxpayer, the Scottish basic rate”,

(c) in paragraph (d) omit “or, if P is a Scottish taxpayer, the Scottish higher rate”, and

(d) in paragraph (e) omit “or, if P is a Scottish taxpayer, the Scottish additional rate”.

(3) After subsection (5) insert—

“ (5A) Where P is a Scottish taxpayer in the applicable year of assessment, a charge under this section is a charge in respect of the amount of the lump sum at the following rate—

(a) if P’s Step 3 income for the applicable year of assessment is nil, 0%;

(b) if P’s Step 3 income for that year of assessment is greater than nil but does not exceed the Scottish basic rate limit for that year, the Scottish basic rate for that year;

(c) if P’s Step 3 income for that year of assessment exceeds the Scottish basic rate limit for that year, the highest Scottish rate for that tax year that is applicable to P. ” .

Amendments to the Income Tax Act 2007

10. —(1) Section 414(2)( 13 ) (relief for gifts for charity) of the Income Tax Act 2007 is amended as follows.

(2) In paragraph (b) after “(see section 10)” insert “and additionally, in the case of a Scottish taxpayer, the Scottish basic rate limit and any other Scottish rate limit,”.