Scottish Income Tax operation by HMRC: service level agreement

Management arrangements

Cost and reimbursement arrangements

29. HMRC will recharge the Scottish Government for any net additional costs wholly and necessarily incurred as a result of the administration of the SIT powers. Any net additional costs will be charged on a full business costs basis.

30. HMRC and the Scottish Government have developed a framework document identifying the known areas where net additional administrative costs will fall and identifying the information that HMRC will rely on to calculate these costs. This will be used as the basis for raising and agreeing invoices with the Scottish Government. This document will be kept up to date to ensure it continues to capture all areas of rechargeable work and is attached at Annex B: Operation of Scottish Income Tax Rechargeable Costs Framework.

31. HMRC will invoice Scottish Government for costs incurred on a quarterly basis having first provided a detailed costs paper which been considered and agreed at the quarterly meetings identified at paragraph 40.

32. Scottish Government will make payment to HMRC within 30 days of the invoice date, or within 30 days of receipt of the invoice if there is a delay of more than 5 days between invoice date and date of receipt.

33. Where required, accrual arrangements will be agreed in advance between HMRC and the Scottish Government for Quarter 4 payments (January to March) to ensure these payments are made in the appropriate financial year.

Day-to-day relationships

34. It is expected that both parties will do all things reasonably within their power that are necessary or desirable to give effect to the spirit and intent of the Agreement.

35. Both parties are expected to act in good faith and use their best endeavours to resolve by agreement any disputes, differences or questions arising out of or relating to this Agreement.

36. Both parties will nominate a single point of contact (SPoC) to oversee the day-to-day management of any matters relating to this Agreement.

37. Such matters will be handled in a pro-active and inclusive manner to ensure that the ongoing, administration of income tax for Scottish taxpayers continues to the required levels as set out in this Agreement.

38. When a dispute arises about the operation of this Agreement, or any variation or interpretation of this Agreement, both parties will initially seek to resolve this informally through the SPoCs. Where individual SPoCs cannot resolve any such dispute, in the first instance any such dispute is to be raised with the relevant Deputy Directors in each organisation as Chairs of the Scottish Income Tax Board.

39. If this does not resolve the issue, it will be referred to the signatories of this Agreement, who will work with the SPoCs and any other relevant individuals to resolve it.

Dispute resolution

40. If the process set out above fails to secure resolution to any dispute between HMRC and the Scottish Government concerning the operation of this Agreement, or any variation or interpretation of this Agreement, the issue will be referred to the Additional Accountable Officer in HMRC and the Scottish Government’s Director General Scottish Exchequer for decision.

41. In exceptional circumstances, where the dispute cannot be resolved by the above process, it is open to either party to refer to ministers. The Joint Exchequer Committee provides Ministerial oversight of the programme of work and will be the final arbiter in points of dispute.

42. Each SPoC will keep each other informed of any planned escalation, prior to the escalation happening.

Review, monitoring and reporting

43. The Scottish Income Tax Board will meet quarterly, chaired by the relevant Deputy Directors in each organisation (or their delegates). The SPoCs will agree the agenda and the Board will consider any relevant matters arising from the delivery of any aspect of this Agreement. This includes all business as usual activity around SIT, across operations, compliance, data and policy. These will consider financial data provided by HMRC for this period so should fall in line with the quarterly reporting and invoicing requirements.

44. Bi-annual reviews will be held between the signatories of this Agreement at which the overall effectiveness of this Agreement and HMRC’s performance against it will be kept under review. These can either take place as meetings or via correspondence.

45. HMRC will publish an annual Scottish Income Tax Report in September which covers the activity it has undertaken in the preceding tax year relating to this Agreement and its performance measures. It will also provide the Scottish Government with in-year updates and the quarterly/monthly provision of information as set out detail in the delivery and reporting schedule for each performance measure at Annex A.

46. The Agreement will be reviewed after the confirmation of UK and Scottish Government income tax rates and bands each year to review compliance with the stated aims and ensure that the Agreement remains fit for purpose. Any changes to the content of the Agreement arising from such a review will be marked by the issue of a new, dated, version number. While such a review will be led by the signatories to the Agreement and SPoCs, it will include input from subject matter experts and policy colleagues, as required.

47. It is open, however, for either party to request to review the Agreement at any stage.

Change or Variations to the Agreement

48. HMRC and the Scottish Government need to inform the other as soon as possible of any circumstances which might lead to the need for an alteration to the obligations of either party under this Agreement.

49. Any significant changes to the agreement shall be negotiated and signed-off by the signatory parties.

50. Any minor variations to the delivery of any of the subsidiary agreements should, however, be able to be agreed between the identified SPoCs within HMRC and the Scottish Government.

Business continuity

51. Both parties must inform the other immediately if any issue arises relating to business continuity in respect of the administration and collection of SIT.

Signed on behalf of their relevant organisations:

Andrew Scott, Director Tax and Revenues Scottish Government

Date: 17 October 2023

Cerys McDonald, Director Individuals Policy, HMRC

Date: 2023