Implementation of the Scotland Act 2016: ninth annual report
Report to inform parliament of the implementation work that has been carried out on fiscal powers devolved in the Scotland Act 2016
4. VAT Assignment
The Scotland Act 2016 provided for the first 10 pence of the Standard Rate of Value Added Tax (VAT), and the first 2.5 pence of the Reduced Rate, raised in Scotland to be assigned to the Scottish Government. VAT rates will continue to be set at a UK-wide level.
Costs
| £m | 2022-23 | 2023-24 | 2024-25 |
|---|---|---|---|
| Implementation | 0.3 | 0.4 | 0.5 |
| Administration/Operation | - | - | - |
31. As part of the Fiscal Framework agreement, the Scottish and UK Governments agreed to share equally all costs incurred as a result of the implementation and administration of VAT assignment (VATA). In 2024-25, total costs incurred by HMRC and the Scottish Government were £0.5 million.
2024-25 Developments
32. In 2023-24, it was jointly agreed by the Scottish and UK Governments that the next steps around VATA would be discussed at a future meeting of the Joint Exchequer Committee (JEC). The 2024 UK General Election and subsequent change in UK Government caused delays in progressing the matter during 2024-25.
33. Data on VAT Assignment, up to 2022, was published by HMRC on 14 November 2024[11].
Future plans
34. Consideration of when and how to implement VATA will take place at a future meeting of the JEC, at a time agreed between both governments. Scottish Government and HM Treasury officials will continue to work together to progress the matter.
Scottish VAT Assignment Forecasts
35. The Scottish Fiscal Commission (SFC) has responsibility for producing illustrative forecasts of the VAT that will be assigned to Scotland. Their latest forecast was published in December 2024[12].
36. This forecast has no impact on the Scottish Government's budget as this is a transitional period, where assigned VAT will be calculated, but not applied to the budget.
Contact
Email: rory.mack@gov.scot