Fiscal framework outturn report: 2021

4. Fully Devolved Taxes

4.1 This section focuses on the operation of the two fully devolved taxes (LBTT and SLfT). It sets out forecasts and outturn for 2020-21, along with the provisional reconciliations required for the 2022-23 Budget. This report uses provisional 2020-21 outturn revenue and BGA data for the fully devolved taxes. The final revenue data will be published as part of Revenue Scotland's Annual Report and Accounts, which are expected in December 2021. HMRC outturn data, which is used to calculate the final BGAs, will also be available in due course.

4.2 Revenue Scotland manages and collects LBTT and SLfT and these revenue streams feed in to the Scottish Budget as they are collected. This means reconciliations for revenue are not necessary for these taxes. The Scottish Government manages any variance between forecast and actual revenues as part of its in-year budget management process.

4.3 However, the BGAs for these taxes do undergo reconciliations and are reconciled in two stages. The first stage is an in-year reconciliation, which normally takes place within the same financial year, on the basis of updated OBR forecasts produced for the UK autumn fiscal event. Outturn data becomes available in the autumn following the end of each financial year. Using these outturn figures, a final reconciliation is applied to the Block Grant in the financial year two years after the original BGA was applied.

LBTT

4.4 Table 5 shows the provisional net effect on Budget for LBTT for 2020-21, and compares outturn to forecasts in a period when the Covid pandemic had a significant effect on the Scottish property market.

*2020-21 LBTT Provisional revenue outturn displayed excludes accounting adjustments applied by Revenue Scotland

4.5 Table 5 shows that the difference between the BGA used to underpin the Scottish Budget 2020-21 and the provisional outturn BGA is £159.9 million, which equates to the net of the in-year reconciliation and the final reconciliation. As shown in Table 6, £166.0 million was added as an in-year reconciliation in 2020-21 and a further provisional final reconciliation of negative £6.1 million is required.

* BGAs set at Scottish Budget 2020 rather than UK Budget due to the later than anticipated UK Budget

**BGAs set alongside the UK Government Spending Review in November 2020 due to late UK Budget

4.6 Table 7 compares the forecasts used to set the 2021-22 Budget with the latest forecasts of revenue and BGA for 2021-22 LBTT. There have been no updated OBR forecasts since the UK Budget in March 2021 and the latest forecast net effect on Budget should therefore be interpreted with caution.

4.7 As noted in paragraph 1.5, the Scottish Budget used provisional BGAs as it took place in January, before the UK Budget in March. Therefore, the change in the forecasts for the BGA reflect the difference between the provisional BGA used in the Budget Act 2021 and the forecast of the BGA provided at the UK Budget in March 2021. The actual in-year reconciliation will be based on updated BGAs forecasts provided alongside the next set of OBR forecasts in October 2021.

SLfT

4.8 Table 8 shows the provisional net effect on the Scottish Budget for SLfT for 2020-21, and compares outturn to forecasts.

*2020-21 SLfT Provisional revenue outturn displayed excludes accounting adjustments applied by Revenue Scotland

4.9 Table 8 shows that the difference between the BGA used to underpin the Scottish Budget 2020-21 and the provisional outturn BGA is £0.5 million, which equates to the net of the in-year reconciliation and the final reconciliation. As shown in Table 9, £0.4 million was added as an in-year reconciliation in 2020-21 and a further provisional final reconciliation of positive £0.1 million is required.

* BGAs set at Scottish Budget 2020 rather than UK Budget due to later than anticipated UK Budget

**BGAs set alongside the UK Government Spending Review in November 2020 due to late UK Budget

4.10 Table 10 compares the forecasts used to set the 2021-22 Budget with the latest forecasts of revenue and BGA for 2021-22 SLfT. There have been no updated OBR forecasts since the UK Budget in March 2021 and therefore the latest forecast net effect on Budget should be interpreted with caution.

4.11 As noted in paragraph 1.5, the Scottish Budget used provisional BGAs as it took place in January, before the UK Budget in March. Therefore, the change in the forecasts for the BGA reflect the difference between the provisional BGA used in the Budget Act 2021, and the forecast of the BGA provided at the UK Budget in March 2021. The actual in-year reconciliation will be based on updated BGAs forecasts provided alongside the next set of OBR forecasts in October 2021.