Policy paper

Tax administration: alignment of HM Revenue and Customs set off provision

Published 9 December 2015

Who is likely to be affected

Persons living in Scotland where there is both a debt owed by that person to HM Revenue and Customs (HMRC) and an amount owed by HMRC to that person. Currently in Scotland any set-off process of sums owed to and by HMRC is effected under Scottish common law.

General description of the measure

This measure extends section 130 and section 131 of Finance Act (FA) 2008 to Scotland, replacing the common law basis that underpins the current set-off arrangements in Scotland. It will ensure that the basis of set-off is consistent across the whole of the UK and removes any risk that with the move to more digitalised tax accounts, HMRC will need to introduce separate set off processes for Scotland and the rest of the UK.

Policy objective

The measure will ensure consistency across the UK in respect of the legal basis on which set-off is applied whilst maintaining the existing procedures for the application of set-off. This change will ensure that all taxpayers are treated on the same legal basis.

Background to the measure

HMRC currently sets off sums payable to persons against outstanding debts in suitable cases and it has proved to be a practical and efficient method of collection which benefits both the customer and the Exchequer.

There has been no formal consultation as this change simply aligns the existing set-off provisions in sections 130 and 131 FA 2008 across the whole of the UK.

Detailed proposal

Operative date

This measure will have effect on and after the date that Finance Bill 2016 receives Royal Assent.

Current law

Section 130 of FA 2008 allows HMRC to set off any credit against any debit in relation to a person where the sum is payable by or due to HMRC under an enactment. This provision currently extends to England, Wales and Northern Ireland. In Scotland the legal basis for any such set-off is common law. Section 131 of FA 2008 ensures that there is no set-off where an insolvency procedure has been applied.

Proposed revisions

Legislation will be introduced in Finance Bill 2016 to amend section 130 to extend its application to Scotland. This will mean that HMRC will be able to rely on the same legal provision in respect of set-off, throughout the UK.

Currently HMRC relies upon the common law power of set-off in Scotland. This change will provide consistency of legal approach. Section 131 FA 2008 will be amended so that it is similarly applicable in Scotland.

Summary of impacts

Exchequer impact (£m)

2015 to 2016	2016 to 2017	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021
-	nil	nil	nil	nil	nil

This measure is not expected to have an Exchequer impact.

Economic impact

The measure is not expected to have any economic impacts.

Impact on individuals, households and families

The measure is not expected to impact on individuals, households, family formation, stability or breakdown.

Equalities impacts

There are no equality impacts arising from this measure.

Impact on business including civil society organisations

This measure is not expected to impact businesses or civil society organisations because it provides clarity and ensures the legal basis is the same as elsewhere in the UK.

Operational impact (£m) (HMRC or other)

The measure will have negligible operational impact.

Other impacts

Other impacts have been considered and none have been identified.

Monitoring and evaluation

This measure will be kept under review through communication with affected taxpayer groups

Further advice

If you have any questions about this change, please contact Helen Sawyer on Telephone: 03000 586355 or email: helen.sawyer@hmrc.gsi.gov.uk.