Scottish Aggregates Tax: proposed approaches to cross-border taxation

1. Introduction

Background

1.1 The Aggregates Tax and Devolved Tax Administration (Scotland) Act 2024^[1] (“the 2024 Act) provides for the key elements of a new devolved tax on the commercial exploitation of aggregates in Scotland - the Scottish Aggregates Tax (“SAT”). SAT is intended to replace UK Aggregates Levy (UKAL)^[2] from 1 April 2026. This is subject to the successful introduction of secondary legislation in Scotland and UK Government legislation on UKAL.

1.2 The Scotland Act 2016^[3] provided the Scottish Parliament with the devolved competence to legislate for the introduction of SAT. The 2024 Act was introduced to the Scottish Parliament in November 2023 and approved by the Scottish Parliament in October 2024. The legislation received Royal Assent and became an Act of the Scottish Parliament on 12 November 2024.

1.3 As a result of devolving the tax to Scotland, there will be two different tax systems operating alongside one another. This has implications in terms of the treatment of cross-border movement of aggregate and, in some circumstances, the risk of double taxation.

1.4 In that context, there are a small number of direct and indirect cross-border scenarios related to the movement of aggregate to and from Scotland that require more detailed consideration and stakeholder engagement. These include, but are not limited to, movement of aggregate into Scotland from the rest of the UK (rUK) where there are multiple links in a supply chain; and where aggregate is collected from a current taxpayer under UKAL on the same product that will be subject to SAT.

Purpose

1.5 The Scottish Government is seeking views on how to approach cross-border taxation for certain direct and indirect supplies of aggregate. The consultation will focus on two specific cross-border scenarios that we understand most usually occur. These scenarios are:

• a collection scenario (where a customer in Scotland collects aggregate from a quarry in the rest of the UK for use in Scotland); and
• a middleman scenario (where a rUK quarry supplies to a rUK middleman who then supplies the aggregate to a Scottish customer).

1.6 However, the consultation additionally invites respondents to highlight other potential scenarios, which might arise and offer views on SAT and UKAL tax treatment. Feedback from this consultation will help inform policy development ahead of the planned introduction of SAT on 1 April 2026.

Scope

1.7 The Scottish Government has proactively engaged with industry representative bodies and wider stakeholders ahead of this consultation, helping to shape the options under consideration. This engagement will continue to ensure that all relevant cross-border scenarios are reflected in the design of SAT.

1.8 The aim is to develop a pragmatic approach to cross-border taxation that minimises administrative burdens on taxpayers and ensures that taxpayers are not subject to tax on the same taxable activity in both jurisdictions. Additionally, the Scottish Government is committed to minimising market distortions - particularly for businesses near the border - and to preventing opportunities for tax avoidance.

1.9 This consultation will run for 8 weeks from 23 June 2025 until 18 August 2025 and offers an opportunity to comment on SAT cross-border taxation of aggregate. This will ensure that SAT achieves its policy intent and does not create unintended consequences. Similarly, it is intended to highlight any other scenarios or potential issues that the Scottish Government should consider.

1.10 The Scottish Government and Revenue Scotland are considering the approaches for movement of aggregate from rUK businesses supplying to a Scottish customer, i.e. imports into Scotland (which would be subject to SAT). HM Revenue and Customs (HMRC) will be responsible for setting out the approach relating to Scottish businesses supplying aggregate to rUK, i.e. exports from Scotland (which would be subject to UKAL).

1.11 Although policy for SAT and UKAL will be responsibility of the Scottish Government and UK Government respectively, both Governments will continue to work collaboratively to explore complementary approaches to cross-border taxation.

1.12 Views are also sought on a range of issues to inform relevant impact assessments and ensure that these are fully considered. Responses are encouraged from all interested parties.

1.13 The Scottish Government will carefully consider all responses to the consultation, prior to finalising SAT cross-border policy.

1.14 The consultation document details the proposed approaches to cross-border taxation. This information is included in section 2. The impact assessments considered are noted in section 3 of the document. The final section contains further information on how to respond to the consultation.