Scotland Act 2016 implementation: tenth annual report

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

35. 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 2025-26, total costs incurred by HMRC and the Scottish Government were £0.4 million. 

2025-26 Developments

36. Scottish and UK Government Ministers discussed VATA at a meeting of the Joint Exchequer Committee on 17 October 2025. The Scottish Government has noted the comments from the House of Commons Scottish Affairs Committee and the Scottish Parliament Finance and Public Administration Committee on the risks and challenges regarding the implementation of VAT, and the governments will have further discussions on this matter.

37. Data on estimated assigned VAT, up to 2023, was published by HMRC on 18 December 2025^[5].

Future plans

38. Scottish Government and HMT officials will continue to work together to progress the matter.

Scottish VAT Assignment Forecasts

39. 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 January 2026^[6]. 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.