‘There was a soldier, a Scottish soldier
Who wandered far away and soldiered far away’
Some of you will remember the old Scottish ballad* which used to be a regular feature of TV coverage at Hogmanay. Now if it were to be revived it would need an extra verse about the Scottish soldier’s struggle, not with the enemy but with the tax system!
Over the last few days a story has been developing about the tax status of soldiers posted to Scotland from other parts of the UK. The Ministry of Defence is reported to be looking at compensating soldiers for the additional income tax which they will pay as a result of moving to Scotland, which of course now has its own rates and allowances.
Some of the figures which have been bandied around are wrong, but it is undoubtedly the case that at least some Scottish resident soldiers will end up paying more income tax next year than their English counterparts. It will, however, only be the highest ranking officers who are likely to feel any significant impact.
Differential tax rates are an inevitable consequence of tax devolution. Compensation for differences in rates seems to us to be a retrograde step and we anticipate a big political row if the MoD does make up the difference.
And what about the other way round? Would anybody seriously suggest that a Scottish solider moving to England should have a pay cut to take away the effect of the tax saving he or she would be make? I can’t see that one getting off the ground.
And if the armed forces were to have a separate treatment what about other groups in society? Should a doctor or nurse moving between England and Scotland have a compensation payment (or additional charge?) or a civil servant, say an Inspector of Taxes, moving from Birmingham to Edinburgh? A tax partner moving from London to Glasgow? A compensation scheme from the MoD would be the thin end of a very slippery slope.
If the MoD were to pay a supplement to compensate Scottish military personnel that compensation would, without special legislation, itself be taxable. And of course as it was paid to a Scottish taxpayer it would be taxable at Scottish rates and would go to the Scottish government – the associated national insurance would however go the UK government! I foresee much head scratching as to how on earth the calculations would work.
Either we have tax devolution or we don’t. Let’s not try to create a half-way house.
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*The pedant in me must point out that this is not an old Scottish ballad at all – it is part of the ballet music from Rossini’s opera William Tell.