Scotland Act 2016 implementation: seventh 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, to be assigned to the Scottish Government. VAT rates will continue to be set at a UK-wide level.


Table 4.1: Implementation and Administrative Costs
£m 2020-21 2021-22 2022-23
Implementation 0.4 0.4 0.3

32. 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. In 2022-23, total costs incurred by HMRC and the Scottish Government were £0.3 million.


33. VAT assignment had been expected to commence from April 2021. However, due to uncertainty surrounding the impact of COVID-19 and EU Exit on VAT receipts, the Scottish and UK Governments agreed to delay implementation and to establish how and when VAT assignment is implemented as part of the Fiscal Framework review.

34. Work on developing the VAT assignment methodology was largely paused in 2022-23, pending the outcome of the review.

35. Data on VAT assignment, up to 2020, was published by HMRC on 29 September 2022[7].

Scottish VAT Assignment Forecasts

36. The Scottish Fiscal Commission (SFC) has responsibility for producing illustrative forecasts of the VAT that will be assigned to Scotland. Their latest forecast of VAT revenue assigned to Scotland was published in December 2022[8].

37. This forecast has no impact on the Scottish Government's budget as this is a transitional period, where VAT assignment will be forecast and calculated, but not applied to the budget.



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