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What would Scottish fiscal autonomy mean for contractors?

Since the SNP ousted the competition at GE2015, there’s much talk of a second Scottish referendum. Those who held their breath over September’s result are once again on tenterhooks at the prospect of Scotland voting itself independence.

Reports in The Guardian that the SNP [is] prepared to defy Cameron and take Scotland to the polls again have been denied by Nicola Sturgeon’s spokespeople.

Sturgeon, SNP Leader, fought the election on that basis, offered no promises of a second poll unless there was ‘material’ change. But who could have expected the “surge of nationalism”, key to Labour’s defeat and Ed Miliband’s subsequent resignation?

In typical political speak, material is yet to be defined. But there are strong favourites that could act as the catalyst to such a change:

  • another resounding success at the polls in next year’s elections north (or even south) of the border;
  • the UK votes to quit the EU in its own referendum;
    • many commentators believe this will happen before the ‘by 2017’ the Tories pledged in their manifesto;
  • not enough fiscal autonomy passing to Holyrood, the home of Scottish parliament;
    • it’s estimated that 60% will be Cameron’s opening gambit, which he’ll deliver later this week.

100% Scottish fiscal autonomy would ring changes without independence

The problem is, it doesn’t need a Scottish referendum to bring the fears of English contractors home to roost.

With total fiscal autonomy, Holyrood would be responsible for 100% of taxation. This would include a higher rate tax of 50p in the pound for earners topping £150,000 per annum. And it’s not beyond the realms of possibility that they get it.

The SNP represents the biggest voice in Westminster Scotland has ever had. Sturgeon swept to victory in her homeland on promises of ending austerity. To end cuts, that means raising capital in other areas.

The Chartered Institute of Taxation has put together an overview of the SNP’s tax manifesto if you want greater insight. But it’s unlikely that Mr Cameron will go any further than the Smith Report’s recommendations. In short, that means some responsibility devolved to Holyrood, but reservations in place to uphold Westminster law for certain policies.

Oil and Gas and IT contractors on the cusp

There are many, many contractors living south of the border who work in Scotland’s Oil and Gas industry. The concern at the moment is that some businesses will relocate to England because of proposed SNP business levies.

Contractors in the top earnings bracket, and many in IT and Oil and Gas are, share that concern. Will higher tax hit them for six if they continue contracting there?

Nothing is certain, especially about work visas and how Scottish firms would pay migrant workers. Yep, for all intents and purposes, English contractors working in a devolved Scotland would be immigrant workers.

And it may not come to that. If the Scottish elections next year are another runaway success for the SNP, devolving 100% of fiscal responsibility from Westminster to Holyrood could be a happy medium. It would:

  • keep the UK united as Mr Cameron and the Conservatives would like;
  • allow SNP to end austerity via Holyrood legislation, as they want.

Either way, contracting in Scotland under your own steam could put a rocket under a few seats. Remain aware of the tax implications or discuss them with your accountant if you’re unsure.

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