A major factor underlying the current treatment of VAT is that nobody knows how much VAT is raised in Scotland because VAT registration is framed on a UK-wide basis: there are no Scotland-specific VAT Registration numbers and many businesses operating in Scotland have their UK headquarters elsewhere in the UK, predominantly in England. Take M&S as an example: it has branches in all 3 of the devolved nations but has a single UK-wide VAT Registration Number for its retail activities. The VAT content of sales is aggegated at M&S Admin HQ as a single figure. Likewise the VAT paid on the purchase of goods for sale is a single UK figure offset against the VAT from all sales, so HMRC never see the VAT deriving from individual UK nations; they're simply not interested in it - another case of UK=England. I suspect M&S might be able to break it down to inidividual stores, but that's a matter for management controls, not a fiscal matter.
The outcome of this is that HMRC estimates VAT raised in Scotland, and inevitably, over time, discrepancies arise which require retrospective adjustment (which will of course also be estimated). This therefore affects Scot Gov budgeting massively by forcing use of guesstimates ahead of the fiscal year in question and in later years after the event. Scot Gov Administration time and costs are increased as significant guesswork is "corrected", but, since nobody knows what the real figures should be, even the corrections are guesses. It's a bit like Alice Through the Looking Glass, yet it could all be sorted if an S, W, or NI could be added to the VAT number to enable separation of VAT data for the devolved nations.
A major factor underlying the current treatment of VAT is that nobody knows how much VAT is raised in Scotland because VAT registration is framed on a UK-wide basis: there are no Scotland-specific VAT Registration numbers and many businesses operating in Scotland have their UK headquarters elsewhere in the UK, predominantly in England. Take M&S as an example: it has branches in all 3 of the devolved nations but has a single UK-wide VAT Registration Number for its retail activities. The VAT content of sales is aggegated at M&S Admin HQ as a single figure. Likewise the VAT paid on the purchase of goods for sale is a single UK figure offset against the VAT from all sales, so HMRC never see the VAT deriving from individual UK nations; they're simply not interested in it - another case of UK=England. I suspect M&S might be able to break it down to inidividual stores, but that's a matter for management controls, not a fiscal matter.
The outcome of this is that HMRC estimates VAT raised in Scotland, and inevitably, over time, discrepancies arise which require retrospective adjustment (which will of course also be estimated). This therefore affects Scot Gov budgeting massively by forcing use of guesstimates ahead of the fiscal year in question and in later years after the event. Scot Gov Administration time and costs are increased as significant guesswork is "corrected", but, since nobody knows what the real figures should be, even the corrections are guesses. It's a bit like Alice Through the Looking Glass, yet it could all be sorted if an S, W, or NI could be added to the VAT number to enable separation of VAT data for the devolved nations.
Great additional info Ken, thank you!
Once again Leah, bang on the money!!