VAT (value added tax)

VAT is a tax added to most goods and services sold by VAT-registered businesses. 

VAT can either be charged at: 

  • 20% (standard rate) 

  • 5% (reduced rate) 

  • 0% (zero rated) 

VAT is fully reserved to the UK Government and collected at a UK level by HMRC.

Scotland’s share of VAT

Scotland currently receives a share of UK-wide VAT as part of the annual transfer of funding from the UK Government (known as the block grant), along with other reserved taxes.

VAT assignment 

The Scotland Act 2016 allowed for the devolution or assignment of a number of taxes to the Scottish Government.  

VAT is planned to be an assigned tax. This means a proportion of VAT revenues would be directly assigned to the Scottish budget each year, with a corresponding reduction in the block grant. 

The proportion would be the first 10p of the standard rate of VAT and the first 2.5p of the reduced rate of VAT raised in Scotland.

VAT returns are completed by businesses on a UK-wide basis, and it is not possible to extract specific Scottish VAT receipts from these returns. We are working with the UK Government to develop and agree the specific methodology for calculating how much Scotland receives. This is ongoing.

The UK Government will still control how VAT operates, and it will continue to be collected by HMRC at a UK-wide level.

More information

The Scottish Fiscal Commission produces forecasts of the VAT revenue that will be assigned to Scotland following the implementation of VAT assignment. 

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