The charity also voiced concern that the draft clauses in their current form could lead to a risk of double taxation on overseas income for Scottish taxpayers.
Chairwoman of the CIOT’s Scotland branch, Moira Kelly, said: “Simplicity must remain the foundation stone of tax devolution; income tax is one area where things will become more complex. For those whose residence status may change during the year, the only way of resolving their tax position will be via self assessment since it will only be possible to determine their final residence status in retrospect. This may force many more taxpayers into self assessment. It is essential that HMRC systems are able to cope with this increased demand.
“Double taxation is another area of concern: it is essential that that current double taxation agreements between the UK and other countries treat Scottish income tax in the same manner as UK income tax. It is not only new Scottish taxes that could lead to double taxation, but also new UK taxes. Therefore, this process needs to consider, in addition, new taxes proposed by the UK Government.
“Scottish taxpayers will also face a uniquely complex system regarding the taxation of their savings income and non-savings income. The former will be subject to UK income tax rates and the latter will be subject to Scottish income tax rates. If the Scottish Government decides to set different rates and thresholds for Scottish income tax to those for UK income tax this would result in a great deal of complexity for Scottish taxpayers to fully understand their tax calculations and liabilities.”
The CIOT’s Low Incomes Tax Reform Group (LITRG) also responded to the draft legislation, calling for closer alignment of the tax and welfare systems.
LITRG’s Technical Director, Robin Williamson, said: “Devolution of tax powers to Scotland represents an historic opportunity to align the tax and welfare systems. This would help to ensure that the taxpayer and claimant has one port of call, particularly where there are interactions between tax, benefits and credits.
“In order to ensure this happens there must be a concerted collaborative effort, not only between the Scottish and UK Governments, but also between the Scottish Government and Scottish councils, if the Scottish Government decides to devolve powers to a more local level.”