Fiscal framework outturn report: 2022

4. Fully Devolved Taxes

32. This section focuses on the operation of the two fully devolved taxes, Land and Buildings Transaction Tax (LBTT) and Scottish Landfill Tax (SLfT). It sets out forecasts and outturn for 2021-22, along with the provisional reconciliations required for the 2023-24 Budget. This report uses provisional 2021-22 outturn revenue and BGA data for the fully devolved taxes. The final revenue data will be published in November 2022 as part of Revenue Scotland’s Annual Report and Accounts. HMRC outturn data, which is used to calculate the final BGAs, is final. However, ONS mid-year population outturn data for 2021-22, which is used to calculate the final outturn BGAs, has been delayed until November 2022.

33. 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.

34. However, the BGAs for these taxes do undergo reconciliations, which take place in two stages. The first stage is an in-year reconciliation, which normally occurs within the same financial year, on the basis of updated OBR forecasts produced for the UK Government 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

35. Table 6 shows the provisional net effect on Budget for LBTT for 2021-22, and compares provisional outturn to forecasts.

*2021-22 LBTT provisional revenue represents tax revenue submitted during the financial year adjusted by returns received in April and May 2022 that relate to the property transactions occurring in 2021-22. The revenue also excludes penalties, interest charged and paid during the financial year 2021-22.

36. Table 6 shows that the difference between the BGA used to underpin the Scottish Budget 2021-22 and the provisional outturn BGA is £164.2 million. As shown in Table 7, £104.4 million was deducted as an in-year reconciliation in 2021-22 and a further provisional final reconciliation of negative £59.8 million is required. The net effect of the in-year reconciliation and the final reconciliation equates to the negative £164.2 million referenced above.

* BGAs set at Scottish Budget 2021 rather than UK Budget due to the later than anticipated UK Budget

37. Table 8 compares the forecasts used to set the Scottish Budget 2022-23 with the latest forecasts of revenue and BGA for 2022-23 LBTT. There have been no updated OBR forecasts since the UK Spring Statement in March 2022 nor updated SFC forecasts since May 2022 and therefore the latest forecast net effect on Budget is purely indicative.

38. The change in the forecasts for the BGA reflect the difference between the BGA used in the Budget Act 2022 and the forecast of the BGA provided at the UK Spring Statement 2022. The actual in-year reconciliation will be based on updated BGA forecasts provided alongside the next set of OBR forecasts later this year.

SLfT

39. Table 9 shows the provisional net effect on the Scottish Budget for SLfT for 2021-22, and compares provisional outturn to forecasts.

*2021-22 SLfT provisional revenue represents tax revenue submitted during the financial year adjusted by returns received in April and May 2022 that relate to the landfill transactions occurring in 2021-22. The revenue also excludes penalties, interest charged and paid during the financial year 2021-22.

40. Table 10 shows that the difference between the BGA used to underpin the Scottish Budget 2021-22 and the provisional outturn BGA is £7.0 million. As shown in Table 10, £5.4 million was added as an in-year reconciliation in 2021-22 and a further provisional final reconciliation of negative £12.3 million is required. The net effect of the in-year reconciliation and the final reconciliation equates to the negative £7.0 million referenced above.

41. Table 11 compares the forecasts used to set the Scottish Budget 2022-23 with the latest forecasts of revenue and BGA for 2022-23 SLfT. There have been no updated OBR forecasts since the UK Spring Statement in March 2022 nor SFC forecasts since May 2022 and therefore the latest forecast net effect on Budget is indicative.

42. The change in the forecasts for the BGA reflect the difference between the BGA used in the Budget Act 2022, and the forecast of the BGA provided at the UK Spring Statement in March 2022. The actual in-year reconciliation will be based on updated BGA forecasts provided alongside the next set of OBR forecasts later this year.