Clarifying the Scope of the Welsh Rates of Income Tax
LITRG and the Chartered Institute of Taxation (CIOT) have jointly responded to HMRC’s technical note and draft legislation on ‘Clarifying the scope of the Welsh rates of Income Tax’ . Welsh rates of Income Tax (WRIT) will be partially devolved from April 2019 on non-savings income for taxpayers who are resident in Wales.
The technical note appears to have dealt with concerns raised previously in relation to the introduction of Scottish rates of Income Tax. However, we are concerned that there needs to be comprehensive guidance published and an effective communication campaign between now and April 2019 so that Welsh taxpayers and their employers understand the changes. Effective publicity and communications will be key to ensuring the smooth introduction and operation of the WRIT. Publicity for the introduction of the WRIT has, in our view, yet to start in earnest. In addition, it is starting from a low base of understanding; a recent survey by the CIOT for the Scottish Taxes Policy Forum looking at the experience of Scottish taxpayers amply demonstrates the poor awareness and understanding of Scottish Income Tax two years after it was introduced, which shows that the task of effective communication should not be underestimated.
There needs to be clear guidance, preferably with examples, to assist Welsh taxpayers with understanding their tax position and tax responsibilities when there are more complex tax situations; for example, understanding the tax position on charitable donations for higher rate tax payers or clarifying the tax position if registered under the Construction Industry Scheme (CIS) . The guidance should also cover the appeal process on the income tax status of a taxpayer.
Guidance must be available for employers to understand what these changes mean and how to implement them as many employees will ask their employer for advice if they do not understand their Pay As You Earn (PAYE) code or payslip.
Also it is important not to consider income tax in isolation; in particular, interactions with tax credits and benefits can have a significant impact on the living standards of low income individuals.
The LITRG and CIOT joint response can be found here: Clarifying the Scope of the Welsh Rates of Income Tax – joint LITRG and CIOT response