1. This is the first ever Scottish Budget delivered before its UK equivalent. This presents challenges because the numbers are necessarily based on estimates. The timetable is for the Scottish Budget Bill to be passed by 5 March 2020, before the UK Budget is delivered on 11 March.

2. Income Tax divergence will grow for "higher" rate taxpayers. The bands for the starter and Scottish basic rates will increase in line with inflation, whilst the other three bands are frozen. The overall divergence will depend on what happens in the UK Budget.

3. A new 2% LBTT rate for non-residential leases with a Net Present Value (NPV) above £2m was introduced. This represents a significant increase for some commercial tenants in Scotland, and compares to the SDLT 2% rate which only applies to NPVs above £5m. The new rate applies from 7 February unless a contract was entered into before 6 February. This will not affect existing LBTT leases in three-year reviews.

4. The Budget highlighted the passing of the Non-Domestic Rates (Scotland) Bill, which implements most of the recommendations of the Barclay Review.

5. There is no firm date yet for the devolution of the Aggregates Levy to Scotland _ in February 2019 the UK Government announced a review of the UK levy following the conclusion of longstanding litigation.

6. Although the Air Departure Tax (Scotland) Act 2017 has been passed, the Scottish Government confirms its introduction will be deferred beyond April 2020, to give time to resolve the issues around the proposed Highlands and Islands exemption. In the meantime, Air Passenger Duty will continue in Scotland on a UK basis.

7. Work is continuing on the proposed assignment of VAT. The first 10 pence of the Standard Rate and the first 2.5 pence of the Reduced Rate are to be assigned to the Scottish Government. Clearly, the consideration of an assignment of VAT revenues while post-Brexit negotiations are ongoing is problematic.


Isobel d'Inverno

Director of Corporate Tax

Alan Barr