Implementation of the Scotland Act 2016: ninth annual report

2. Fully Devolved Taxes

The Scotland Act 2016 provided for the devolution of powers to introduce a tax charged on the carriage of passengers by air from airports in Scotland and on the commercial exploitation of aggregates in Scotland. Devolved taxes drawing on these powers have not yet been introduced.

Costs

10. Consistent with the approach taken for previous reports, the figures in Table 2.1 above relate only to Revenue Scotland. For this report, the 2024-25 figure relates solely to costs incurred in work to prepare for the future introduction of a devolved replacement for the UK Aggregates Levy.

Scottish Aggregates Tax

11. The Scotland Act 2016 provided the Scottish Parliament with the devolved competence to legislate for the introduction of Scottish Aggregates Tax (SAT). SAT will replace UK Aggregates Levy (UKAL) in Scotland.

2024-25 Developments

12. The Aggregates Tax and Devolved Taxes Administration (Scotland) Act 2024^[2] received Royal Assent on 12 November 2024. The Act sets out the key arrangements for SAT, including to provide for its administration by Revenue Scotland.

13. On 24 January 2025, a public consultation on the draft secondary legislation for SAT^[3] was launched. The regulations specify the administration requirements associated with the tax, alongside other changes required for tax introduction. The intent of the secondary legislation is to deliver an operationally efficient SAT and ensure that the tax operates effectively in relation to the wider devolved taxes legislative regime. The Scottish Government will carefully consider all responses to the public consultation, prior to finalising decisions on legislation for introduction to the Scottish Parliament.

Future plans

14. The necessary secondary legislation will be considered by the Scottish Parliament. If approved, the Scottish Government intends that introduction of SAT will occur on 1 April 2026.

15. In order for SAT to be introduced, the provisions of the 2016 Act which disapply the existing UKAL^[4] regime in Scotland will also require to be brought into force by regulations laid by HM Treasury in the UK Parliament. UK and Scottish Governments are working closely together to agree the block grant adjustment (BGA) arrangements for the tax, taking account of the provisions of the Fiscal Framework^[5] agreement.

16. Revenue Scotland, Scotland's tax authority for devolved taxes, will be responsible for the collection and management of SAT when introduced. A programme of activity to deliver the systems, processes and other requirements for SAT is underway.

17. The Scottish Government continue to engage closely with stakeholders, in line with the New Deal for Business^[6] and Framework for Tax^[7]. Discussions are also ongoing between the Scottish Government, Revenue Scotland, and His Majesty’s Revenue and Customs (HMRC) to ensure that the administrative arrangements for SAT and UKAL work effectively together.

Air Departure Tax

2024-25 Developments

18. The introduction of Air Departure Tax (ADT) in Scotland remains deferred to allow the issues raised in relation to the exemption for flights departing from the Highlands and Islands to be resolved. The UK Government will maintain application of Air Passenger Duty in Scotland in the interim.

Future plans

19. We are actively working with the UK Government to implement Air Departure Tax in a way that protects Highlands and Islands connectivity while complying with the UK Government’s subsidy control regime.

20. The Scottish Government recognises the critical role air connectivity plays in the lives of residents and communities in the Highlands and Islands, and in the promotion of sustainable economic growth across the region.

21. We will review the rates and bands of ADT once a solution to the Highland & Islands exemption has been identified, and prior to the implementation of the tax, to ensure they are aligned with our net zero ambitions.