A Guide to Doing Business in Scotland Tax in Scotland

The majority of fiscal powers are currently reserved to the UK Government. Consequently, most of the tax law which applies in Scotland is UK law. HM Revenue & Customs (HMRC) collects and administers UK taxes.

 

Certain tax raising powers have been devolved to the Scottish Parliament and there are at present two operational Scottish taxes – Land & Buildings Transaction Tax (LBTT) and Scottish Landfill Tax. In addition, Scotland has been granted power to implement its own air passenger duty.

LBTT

LBTT is very similar to stamp duty land tax, which applies in England.  From April 2018, a separate Land Transaction Tax has applied in Wales. 

LBTT is administered by Revenue Scotland, the Scottish tax authority. LBTT applies on the acquisition of a land interest e.g. a leasehold interest, or outright ownership of a property. It is a progressive tax with rates between 0% and 5% for commercial properties and 0% and 12% for residential properties. An additional rate of 4% applies where a residential property is acquired by a person who is not an individual, or an individual acquires as second residential property.

Scottish taxpayer

The Scottish Parliament also has the ability to set the rates and bands of income tax that apply to Scottish taxpayers. A Scottish taxpayer is (broadly) an individual who is resident in Scotland. The Scottish Income Tax Rate applies to all non-savings and non-dividend income  of Scottish taxpayers. It should be noted that, at present, the Scottish Parliament has no ability to decide what is and is not subject to income tax – this power continues to be held by the UK Government.

A business which operates in Scotland and has employees will be required to deduct income tax at the appropriate rate from any payment made to those employees and account to HMRC for any tax so deducted through the Pay As You Earn (PAYE) system. The Scottish rate of income tax is collected by HMRC on behalf of the Scottish Parliament.

Corporate tax

The Scottish Parliament has no powers in relation to the application of corporation tax. This means that where a company is set up in Scotland, or an overseas company chooses to set up a permanent establishment in Scotland, the profits of that company or permanent establishment will be subject to UK corporation tax.

VAT

The UK also operates an indirect sales tax, known as value added tax (VAT). VAT is payable on supplies of goods or services which are made in the course or furtherance of a business. Different rates of VAT (from 0% to 20%) are applied to different types of supplies of goods and services. A business only becomes liable to charge VAT on the supplies which it makes where the value of those supplies is in excess of the VAT registration threshold, which is currently £85,000.

Our Awards & Accreditations

  • Shortlisted for Firm of the Year at the Scottish Legal Awards 2022.

  • In 2016, we became one of the first law firms in Scotland to become Living Wage accredited employers.

  • Winners of Corporate & Commercial Team of the Year and Family Law Team of the Year at the Scottish Legal Awards 2020.

  • Our Real Estate team won the Property Team of the Year Award at the British Legal Awards in 2018.

  • Winner of SME of the Year at the Scottish SME Awards 2017, hosted by Scottish Business Insider.

  • Highly Commended for Commercial Team of the Year at the British Legal Awards 2016.

  • We are a proud member of the Legal Sustainability Alliance, a network of law firms committed to working collaboratively to reduce our environmental impact

  • In 2019, MacRoberts achieved Cyber Essentials Plus certification, a UK Government entry-level information security standard. 

  • MacRoberts holds the ISO 9001:2015 certification for Quality Management, the most widely recognised quality management system standard in the world.

  • MacRoberts holds the ISO14001:2015 certification for Environmental Management, demonstrating our ongoing commitment to environmental awareness.

  • MacRoberts holds the ISO27001:2013 certification for Information Security, an internationally recognised security gold standard.

  • Business continuity is a critical element of the Business Management System at MacRoberts and we hold full accreditation with the ISO 22301:2019.

  • MacRoberts is a member of IP Inclusive, a network of intellectual property professionals working to make our community more equal, diverse and inclusive.

  • We are active members of the PRIME Programme – an organisation that focuses on ensuring a career in law is open to talent from all economic and social backgrounds.

  • MacRoberts supports the Scottish Business Pledge, a values-led partnership between Government and business that is based on boosting productivity and competitiveness through fairness, equality and sustainable employment.

  • We are supporters of the Partnership for Change, a network of organisations and individuals who share a common ambition to improve diversity on boards and in senior leadership.

  • MacRoberts is a Disability Confident employer, and are committed to disability equality across our firm.

  • MacRoberts fully supports flexible working practices and supports family-friendly working practices.

  • MacRoberts is a member of The Glass Network, Scotland's organisation for LGBT+ allied legal professionals.
  • In 2022, MacRoberts received a Bronze Award in Stonewall's Workplace Equality Index for our commitment to LGBTQI+ inclusivity in the workplace.

  • MacRoberts is a longstanding member of Scotland Food & Drink, the leading trade association for Scotland's food and drink industry.

  • MacRoberts is an Associate Member of SELECT, Scotland's largest construction trade association.