Press release: Students left in limbo over new Scottish taxpayer guidance, charity warns
The Association of Taxation Technicians (ATT) has voiced concern that students studying at universities in Scotland, and who choose to stay in student accommodation during the holidays, will be treated as Scottish taxpayers according to new HMRC guidance(1). The Association is worried that the loss of temporary resident status could see students subject to a higher rate of income tax.
As a Scottish taxpayer, students would be liable to pay the Scottish rate of Income Tax on their earned income from 6 April 2016.
Paul Hill, Chairman of the ATT’s Technical Steering Group, commented:
“From April next year, the Scottish Government will reduce income tax rates by 10p and introduce a Scottish Rate of Income Tax (SRIT). If the SRIT brings income tax rates above those levied in the rest of the UK, students (assuming their earnings are above the personal allowance threshold) will pay more income tax in becoming a Scottish rate taxpayer. However, if the SRIT is below 10p they will benefit by paying lower income tax then they would in the rest of the UK. This confusion is not helpful to students who are now left in limbo until the Scottish Government decides the SRIT rate.
“HMRC have provided two very similar examples in their draft guidance concerning two students studying and living in Scotland, where their parents’ homes are elsewhere in the UK. Both students have continued to be registered for all the usual matters like doctors, banks etc. at their parents’ homes. The only differentiating factor between the two examples is that Student A goes home to his parents’ house when each term is over, whilst Student B stays on at University during the holidays in order to continue to work at the job he or she has during term-time. HMRC regard Student B as a Scottish taxpayer purely based on that fact.
“It seems very unreasonable for HMRC to conclude that staying on in Scotland in order to keep the part-time work that is supporting Student B (or to have access to good studying facilities) means that her main place of residence is no longer at her parents’ home.
“University students ought to be treated as being temporarily resident in their place of study for the duration of their course as the vast majority are likely to intend to return to their families after graduation. If they are treated as only being temporarily resident in Scotland then it follows that they remain permanently resident elsewhere, in most cases at the family home. As long as that address is outside Scotland, the student should not be brought within the new Scottish Income Tax rules.”
Notes for editors
1. The draft guidance can be read in full here.
Technical Team