Whether an individual is deemed to be Scottish for the purposes of paying Scottish income tax rates will depend on where they live, or reside, during the course of the tax year.
For the vast majority of individuals, the question of whether or not they are a Scottish taxpayer will be a simple one – they will either live in Scotland and thus be a Scottish taxpayer, or live elsewhere in the UK and not be a Scottish taxpayer. Scottish taxpayer status is dependent upon being UK resident for tax purposes – a non-UK resident cannot be a Scottish taxpayer.
Scottish taxpayer status is applicable for an entire tax year, and complications could arise where an individual’s residential situation is less straightforward. A series of tests exists in order to help determine taxpayer status in such cases.
The rules governing residence are complex, but an individual who is resident in the UK for tax purposes will be a Scottish taxpayer if they satisfy one of the following tests:
As set out above, for those who have more than one place of residence in the UK it is necessary to determine whether they have a ‘close connection’ to Scotland or another part of the UK.
Central to this process is establishing which has been their ‘main place of residence’ for the longest amount of time during the tax year. (Note that the criteria are not the same as those governing the election of a main residence for capital gains tax purposes.)
HMRC guidance includes a range of potential indicators to assist with the process of determining a main place of residence for the purposes of Scottish income tax. These include such areas as:
Where it is not possible to identify a ‘close connection’ to Scotland or any other part of the UK by means of an individual’s place of residence, it will be necessary to apply day counting – that is, calculating the number of days spent in Scotland compared with those spent elsewhere in the UK.
Where an individual spends at least as many days in Scotland as the rest of the UK, they will be deemed a Scottish taxpayer. A ‘day spent’ refers to where they are at midnight on any given day (unless they are ‘in transit’).