Scottish Landfill Tax (SLfT)

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Scottish Landfill Tax (SLfT) is a tax on the disposal of waste to a landfill in Scotland, whether to an authorised landfill site or not. SLfT applies to all taxable disposals made in Scotland on or after 1 April 2015.

SLfT is chargeable by weight and there are currently two rates for taxable disposals:

• The lower rate, which in 2022/23 was £3.15 per tonne, which applies to those less polluting wastes listed in The Scottish Landfill Tax (Qualifying Material) Order 2016
• The standard rate, which in 2022/23 was £98.60 per tonne, which applies to all other taxable waste.

Figure 19: Tonnage of taxable disposals, by rate and year

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Standard rate disposals of 1.18 million tonnes were declared in 2022/23, a decrease of 10% on the previous year. Lower rate disposals increased by 1%. Total tonnage is down 6%, which may  indicate a return to the trend of decreasing tonnage year on year which was observed each year prior to 2021/22, which saw an increase in tonnage, largely due to facilities returning to normal disposal activities after the previous year was affected by the COVID-19 pandemic.

Table 12: SLfT declared due, contributions to the Scottish Landfill Communities Fund (SLCF) and credits claimed by year

Land and Buildings Transaction Tax

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Overview

Land and Buildings Transaction Tax (LBTT) is a charge on land transactions in Scotland. Land transactions must be notified to Revenue Scotland, unless the chargeable consideration is less than £40,000, or the transaction is otherwise exempt.

The Additional Dwelling Supplement (ADS) is an additional charge which applies when the taxpayer is purchasing an additional property and not replacing their main residence. ADS most commonly arises for purchases of a second home or a buy-to-let dwelling.

Chargeable Consideration is defined as anything given in money or money’s worth for the subject-matter of the transaction. For example, the chargeable consideration for a house will be the price paid for the property, land and fittings. For leases, chargeable consideration can include rent payable and any premium paid on the lease.

Table 1: Number of LBTT returns received by type of transaction and year, last 5 years

The total number of LBTT returns received in 2022/23 was 6% lower than in the previous year. This decrease was mainly driven by a reduction in residential conveyance returns, while non-residential returns remained fairly steady and there was an increase in both lease and lease review returns. 

The fall in residential LBTT returns may be due in part to rising house prices, as well as a cooling off from the previous year, where built up demand resulted in a record high number of returns following the easing of COVID 19 restrictions.

Figure 1: LBTT including net ADS declared due, by year and transaction type

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2022/23 saw the highest ever LBTT declared due at £855.9 million. This up 5% on the previous high of £814.0 million recorded in 2021/22. This record-high figure was driven mainly by residential LBTT and net residential ADS, which rose by 12% and 19% respectively, offsetting a decline in non-residential LBTT. 

Since the introduction of ADS in April 2016, total residential LBTT revenue has typically been at least twice as high as non-residential LBTT. This remains true in 2022/23 with total residential LBTT (£637.5m) being more than three times the figure for total non-residential LBTT (£191.2m). 

Before 2016, figures for residential and non-residential were much closer. The current ratio reflects rising house prices, and the fact that ADS mainly applies to residential conveyances (27% of total residential LBTT was due to ADS in 2022/23). Excluding net ADS, residential LBTT was around 2.5 times the figure for non-residential LBTT. 

1.3 Residential LBTT excluding ADS

LBTT rates and bands for residential transactions as of 1 April 2021:

Table 2: LBTT declared due, excluding ADS, and number of returns for residential conveyances

Residential LBTT declared due, excluding ADS, hit a record high of £465.5 million in 2022/23, which is 12% up from the previous high set in 2021/22. The number of residential LBTT returns received was down 7% from 2021/22. 

The average amount of LBTT paid per return for residential conveyances had not varied much in the 3 years prior to 2021/22, with the figure ranging between £2,500 and £2,700. In 2021/22 this figure rose significantly, jumping 46% on the year before to an average of £3,800 paid per return. In 2022/23 this figure rose again by another 18%. This rise is driven by an increase in the proportion of conveyances in the higher LBTT bands, which reflects rising property prices. 

Figure 2: Number of residential conveyance returns received by month

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Figure 3: LBTT declared due excluding ADS, for residential conveyances received by month

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Both the number of residential LBTT returns and the revenue excluding ADS show consistent seasonal, monthly, and weekly patterns. Fewer returns in all of the LBTT bands are received in January and February, and these months are also associated with lower average house prices. This is due in part to the proportion of returns relating to properties in the two highest tax bands being lowest at this time of year. 

After accounting¹ for the known seasonal and calendar effects, the number of residential LBTT returns received remained relatively constant from 2015/16 to 2019/20. The effects of the COVID-19 pandemic on this trend can be seen from the end of March 2020 with the start of the first lockdown. 

Between 15 July 2020 to 31 March 2021 the nil rate band threshold was temporarily increased from £145,000 to £250,000. This likely led to the unusually high number of returns seen in March 2021, and the large drop in April 2021 when the threshold reverted back to £145,000. 

Figure 4: Distribution of residential conveyance returns received by residential LBTT band and year

[1] Seasonal adjustment performed using the X13-SEATS-ARIMA procedure, using a weighted count of weekdays in each month as a regression factor to adjust for calendar effects.

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Figure 4 shows that there has been a decreasing proportion of returns in the £0 to £145,000 band each year and increasing proportions of returns received in all higher bands for the last five years. This proportion shift is caused both by a decrease in the absolute number of returns in the bottom two tax bands and significant increase in the number of returns in the bands above £325,000. This is consistent with the increase in average residential property prices reported by Registers of Scotland.

37% of returns received in 2022/23 had a total consideration of less than or equal to £145,000 and, therefore, had zero tax liabilities². This is the lowest proportion on record. However, Figure 5 shows LBTT revenue is dominated by the £325,000 to £750,000 band, which in 2022/23 contributed 60% of LBTT, while making up only 16% of returns. The highest band (£750,001 and above) accounts for 1% of returns received and 23% of tax. 

[2] Residential conveyance transactions under £145,000 can incur tax liability if they are linked.

Figure 5: Distribution of residential LBTT revenue, excluding ADS, by residential LBTT band and year 

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The share of revenue contributed by the top two tax bands increased in 2020/21 due to the temporary change to the nil rate threshold, effective from 15 June 2020 to 31 March 2021, which had the effect of reducing tax liabilities in the second-lowest residential tax band (consideration from £145,000 to £250,000) to zero, and reducing gross tax liabilities for all other residential transactions by £2,100.

Figure 6: Distribution of numbers of residential conveyance transactions by total consideration and tax band 2022/23 (based on effective date)

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Figure 6 shows a more detailed breakdown of the number of residential conveyance transactions by total consideration (e.g. house price) for transactions that took place in 2022/23. The majority of transactions are towards the lower end of the scale (approximately two-thirds are less than or equal to £245k), with the distribution then extending to a long tail of higher value transactions. Due to the smaller numbers of transactions at the higher value end, the width of the total consideration categories is increased at the points indicated on the chart. 

Additional Dwelling Supplement

If a taxpayer buys a new main residence before selling their previous main residence, or if they are buying a second home or buy-to-let property, they will have to pay Additional Dwelling Supplement (ADS). This payment can be reclaimed if the previous main residence is sold within 18 months, and the claim is made within 5 years of the submission date.

In 2022/23, ADS was charged at 4% until December 16 2022, at which point the rate was raised to 6%. Prior to January 25 2019 ADS had been charged at 3%.  

Table 3: Gross ADS reclaimed and number of ADS repayments claimed for residential LBTT returns by year 

Roughly £206 million in gross ADS was declared due in 2022/23, an increase of approximately £18 million (9%) on the previous year. 

The fact that a record high figure for ADS declared due was recorded in 2022/23 despite the number of returns with ADS declared due being down slightly on the previous year reflects the increase in the rate of ADS from 4% to 6% towards the end of Q3 of the financial year. The sharp increase in ADS declared due from 2018/19 to 2019/20 was due largely to the increase in the ADS rate from 3% to 4% in January 2019.

Around 10% of taxpayers who submitted LBTT returns with ADS declared due in 2022/23 have since claimed repayment of ADS, accounting for 17% of the gross ADS declared due. 

The ADS reclaim rate for 2022/23 appears lower than previous years. This is to be expected as taxpayers have had less time to submit a repayment claim on more recent transactions, and the figure is likely to increase over time as more claims for repayment are made. Only minimal revisions are expected to repayment claims relating to returns made up to 2020/21. 

Though taxpayers have 18 months from the effective date of the transaction to sell their previous main residence and reclaim ADS, the majority of claims for repayment are received much sooner. Taxpayers can submit repayment claim up to five years after selling their previous residence.

Table 4: Percentage of Gross ADS reclaimed and number of claims for ADS repayment received, by number of weeks following initial LBTT return

Approximately 9% of ADS repayment claims are received within four weeks of the initial tax return being submitted. More than half of all claims are received within 20 weeks and approximately 84% of all claims are received within a year. The percentages are very similar for gross ADS reclaimed, as claims received and gross ADS reclaimed follow a near identical distribution. 

Table 5: Number of LBTT returns received with ADS declared due and the proportion with a subsequent claim for repayment, by year and stated intention to reclaim

For LBTT returns submitted with ADS declared due in 2022/23, around 84% of taxpayers stated they did not intend to reclaim ADS. This is the highest percentage on record, though only slightly higher than in 2021/22. 

In 2020/21 around 73% of taxpayers who stated that they intended to reclaim ADS went on to do so, the highest proportion so far. In 2021/22 this figure remained high at 71%. The proportion of taxpayers who stated no intention to reclaim ADS but subsequently went on to file a reclaim has never been higher than 4.5%. 

These figures indicate that a substantial proportion (around 27% at its lowest in 2020/21) of taxpayers who stated that they intended to reclaim ADS did not subsequently do so. However, when a taxpayer had stated that they did not intend to reclaim ADS then it was very unlikely that they would go on to submit a reclaim.

Figure 7: Distribution of residential conveyances by type of transaction (ADS declared due and intends/does not intend to reclaim ADS) and residential LBTT band, 2022/23

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Figure 7 shows that the proportion of conveyances in the lowest tax band is three times as high for returns where the taxpayer does not intend to reclaim ADS, compared to returns where they do intend to reclaim. This likely reflects the fact that these transactions will include buy-to-let properties and second homes. Higher value transactions make up a much higher proportion of returns where the taxpayer intends to reclaim ADS. This is likely to reflect a number of factors including the fact that these transactions will include taxpayers who may be moving up the property ladder as they intend to replace their previous main residence.

Non-residential conveyances

Non-residential rates and bands for transactions on or after 25 January 2019:

Table 6: Non-residential LBTT, excluding ADS, declared due and number of returns received by year

LBTT from non-residential conveyances, including ADS, was £187 million in 2022/23, a decrease of £36 million (16%) on the previous year, but the number of LBTT returns received only dropped slightly to 7,040 from 7,080 last year. The LBTT figure in 2021/22 was unusually high due to built up demand from the previous year which was impacted by the COVID 19 pandemic. Despite non-residential LBTT falling in 2022/23, the figure is still high compared to all years prior to 2021/22.

Despite only making up 6% of LBTT returns received, non-residential conveyances accounted for approximately 22% of total LBTT declared due in 2022/23. The average LBTT declared due per return fell by approximately 16% on the previous year to £26,600. 

Total revenue from non-residential LBTT returns is disproportionately impacted by tax reliefs when compared to residential LBTT. This is partly responsible for the large difference between total residential LBTT revenue and non-residential LBTT revenue each year. 

Compared to residential LBTT, the value of LBTT declared from non-residential conveyances can change substantially year to year, due to fluctuations in the small number of very high value transactions seen in each year.

Figure 8: Number of non-residential LBTT returns received by month and year

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The distribution of non-residential LBTT returns received throughout the year is typically uniform from month to month, but with notable peaks at the end of both the calendar year and financial year. 2022/23 held true to this pattern.

Table 7: LBTT excluding ADS declared due by month and year for non-residential conveyances (£Millions)

Non-residential LBTT declared due is more variable than the number of LBTT returns received, because a small number of high-value transactions can have a significant impact on the overall tax. There is typically a peak in December, though the size of the peak varies from year to year. In 2022/23, non-residential LBTT was higher in November and December than in other months, but the typical December peak was not as pronounced as usual. Unlike the previous year, there was no secondary peak in June in 2022/23 as numbers steadily fell throughout the summer months.

Figure 9: Non-residential LBTT, excluding ADS declared, for the top 5% of  transactions by value, per year

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Figure 9 shows that when ranked from highest to lowest transaction value (purchase price), the top 5% of non-residential returns account for the vast majority of LBTT due. In 2022/23 the top 5% most valuable transactions made up 74% of non-residential LBTT due. Total non-residential LBTT is generally highly dependent on higher value transactions, with 96% of LBTT coming from the top 20% most valuable non–residential transactions in 2022/23. In fact, the entire lower half of non-residential LBTT returns ranked by value, accounted for less than 0.1% of the total non-residential LBTT declared due.

LBTT declared due for the top 5% most valuable non-residential transactions varies from year to year, with these variations accounting for the majority of the change in non-residential LBTT declared due. LBTT declared due for the top 5% of transactions decreased by 17% in 2022/23 compared to the previous year, corresponding to a 16% decrease in total non-residential LBTT. 

1.5 Leases

A non-residential lease that is granted, or is treated as having been granted, for the first time on or after 1 April 2015 is potentially chargeable to Land and Building Transactions Tax.  

99% of leases are non-residential, but analysis in this section includes a small number of leases which taxpayers have classified as residential, perhaps mistakenly. However, the overall tax position remains correct as the LBTT due for a lease is the same whether it is residential or non-residential. 

Table 8: LBTT declared due and number of LBTT returns received by year for leases

£26 million in LBTT was declared due for leases in 2022/23, accounting for 3% of total LBTT declared. Both the number of lease returns received and the total LBTT due from leases remained fairly steady in comparison to 2021/22, with both figures increasing only slightly. The mean amount of LBTT due per lease return also remained consistent, the figure being roughly £5,700 for both 2022/23 and 2021/22.

Figure 10: LBTT declared due for top 5% of lease transactions by value, per year

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When lease returns received in 2022/23 were ranked in order from highest to lowest total consideration (cost of the lease), the top 5% of leases made up 69% of the total LBTT declared due on leases. Like non-residential conveyances, the distribution of LBTT from leases in general is heavily skewed towards the most valuable transactions, with 91% of total lease LBTT coming from the top 20% of transactions. 

LBTT for leases may be due on the net present value of rent, as well as payment of a premium to secure the lease. 95% of all LBTT declared due on leases in 2022/23 was due to rent, with the remaining 5% due to premiums. LBTT due on premiums is dominated by a small number of large premiums over £350,000. LBTT due on the rental value of leases is more widespread, with 59% of lease returns declaring some amount of LBTT due on rent in 2022/23.  

1.6 Reviews of the tax chargeable for a lease

Reviews of a lease include:

• Three-yearly reviews, which inform Revenue Scotland of any changes which have occurred since the effective date or previous review date. Tax chargeable on the lease is reviewed and the new Net Present Value is calculated when the review is submitted.
• Assignations: when a lease is assigned to a new tenant, the outgoing tenant must submit a review within 30 days of the lease being signed, including an assessment of the amount of tax chargeable reflecting any changes since the last return was submitted.
• Terminations: When a lease is terminated, the tenant at the point of termination must submit a return to Revenue Scotland, including an assessment of the amount of tax chargeable reflecting any changes since the last return was submitted.

The first six-year reviews became due from 1 April 2021 and make up part of the three-year review figures for this year.

Table 9: LBTT declared due and number of returns received for reviews, by year

Reviews of a lease accounted for approximately £1m of LBTT declared due in 2022/23. This makes up roughly 0.1% of total LBTT for the year. 

Approximately 4,720 reviews of a lease were received in 2022/23, of which 69% declared no change in the LBTT due from the original lease return (meaning LBTT declared due on review was £0). 19% declared further LBTT due and 12% claimed a repayment of LBTT.

In 2018/19, 11% of lease reviews declared further LBTT due to be paid. This percentage rose each year until it reached 19% in 2021/22, then stayed at this level in 2022/23. Likewise, the percentage of lease reviews declaring a repayment of LBTT due to the taxpayer rose each year from 7% in 2018/19 to 13% in 2021/22, then dropping slightly to 12% in the past year. 

In the past year, almost one in three reviews of a lease resulted in a change to the amount of LBTT due on the lease. In 2018/19, fewer than one in five reviews resulted in any change to the LBTT due.

1.7 Sub-Scotland

This section contains breakdowns of LBTT data at local authority level, as well as by ITL 2 (International Territorial Level). The figures here are referred to as estimates, due to the fact that location data for a proportion of LBTT returns has been imputed. This is necessary as we use the postcode stated on LBTT returns to assign them to higher geographies and not all LBTT returns are submitted with a valid postcode, primarily non-residential returns. 

In 2022/23, 98% of residential LBTT returns and 69% of non-residential returns contained a valid postcode. 

In order to improve the completeness of our address data, we match records without a valid postcode to data provided by Registers of Scotland and link on the postcode recorded alongside the title registration. If we cannot find a postcode using this method, we find a “donor” record which is similar to our incomplete “recipient” record, based on information on the LBTT return, and use this to impute geographical information.

This method provides robust estimates for residential and non-residential conveyances. The estimates for residential conveyances are more reliable because residential conveyance returns are more likely to include a valid postcode and more likely to match to a title registered with Registers of Scotland. 

For the estimates presented here of returns submitted in 2022/23, location was imputed using the donor method for less than 1% of residential returns and 13% of non-residential returns. 

1.7.1 Sub-Scotland: Residential LBTT

Figure 11: Estimates of LBTT declared due, excluding ADS, for residential conveyances by local authority, 2022/23 (£Millions)

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In 2022/23, City of Edinburgh accounted for £131.4 million (28%) of  residential LBTT declared due, excluding ADS, by far the biggest contribution from a single council area. Next highest was Glasgow City, making up 8% of total residential LBTT at £36.5 million. City of Edinburgh has accounted for 30% to 34% of LBTT revenue, excluding ADS, each year since 2015/16. No other local authority has ever accounted for more than 9%.

The 3 local authorities with the highest mean LBTT declared due per transaction for residential returns were:

• City of Edinburgh at £11,500
• East Renfrewshire at £9,900 and 
• East Lothian at £9,700. 

The lowest averages were for:

• Na h-Eileanan Siar at around £800 
• West Dunbartonshire at £1,000 and 
• North Lanarkshire at £1,400.

From 2021/22 to 2022/23, LBTT revenues increased in 26 of the 32 local authorities. City of Edinburgh saw the largest absolute increase with a rise of £7 million (5%), while the largest percentage increase occurred in Shetland Islands where residential LBTT was up 47% (from approximately £0.35 million to £0.5 million). The largest percentage decrease on the previous year was in Na h-Eileanan Siar, which saw 34% less residential LBTT declared than in 2021/22. 

Figure 12: Estimated number of residential conveyance returns received by local authority   

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Glasgow City had the most residential conveyance returns received in 2022/23 with 11,740 returns (11% of the total), just ahead of City of Edinburgh with 11,390 returns (11%). 

Numbers of residential conveyances decreased in 29 of 32 local authorities from 2021/22 to 2022/23, with only three local authorities seeing more residential LBTT returns received than last year.

The council areas which saw an increase in residential returns were:

• East Lothian with an increase of 3%
• Stirling with an increase of 2%
• East Dunbartonshire  with an increase of 1%.

The council areas with the largest percentage decrease in number of returns on the previous year were:

• Na h-Eileanan Siar with a decrease of 31%
• Orkney Islands with a decrease of 20%
• Angus with a decrease of 19%.

1.7.2 Sub-Scotland: Additional Dwelling Supplement

Figure 13: Estimates of gross residential ADS declared due (£Millions) by local authority and percentage which is intended to be reclaimed by taxpayer, 2022/23

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City of Edinburgh accounted for 21% of gross ADS declared due in 2022/23 with around £43 million, an increase of £2 million on the previous year. Glasgow City accounted for the second-largest share of ADS, making up 12% of the total with £24 million. Edinburgh tends to dominate LBTT excluding ADS (28% of total) more than gross ADS. This is because the ADS rate is flat whereas the LBTT rate is progressive, meaning the effective tax rate increases with total consideration.

The council area with the highest proportion of gross ADS coming from taxpayers who don’t intend to reclaim it was Dundee City at 86%. This figure was lowest in Orkney Islands at 51%.

The council areas with the greatest number of returns with ADS declared due were: 

• Glasgow City with 3,360
• City of Edinburgh with 3,110
• Fife with 1,600.

At 93%, Dundee City also had the highest proportion of returns where the stated intention was to not reclaim ADS. The lowest figure was for Orkney Islands, where 54% of returns stated no intention to reclaim ADS.

1.7.3 Sub-Scotland: Residential conveyances not replacing a main residence

Figure 14: Estimates of the percentage (%) of all residential conveyance returns received where the taxpayer did not intend to reclaim ADS declared due, by local authority and year

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The data shown in Figure 14 is an indicative measure of the percentage of all residential conveyances where the taxpayer is purchasing an additional property (e.g. buy-to-let dwelling or a second home) rather than replacing their main residence. In 2022/23 this was highest in Dundee City at 31.1%.

The lowest figure was in Midlothian, where only 11% of residential LBTT returns declared ADS due, which the taxpayer did not intend to reclaim. Midlothian has been lowest in four of the past five years.

For the council areas with the highest numbers of residential returns, the figures were:

• Glasgow City: 27%
• City of Edinburgh: 24%
• Fife: 20%

1.7.4 Sub-Scotland: Residential tax bands

Figure 15: Distributions of residential LBTT returns by local authority and tax band, 2022/23

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Figure 15 shows the distribution of residential transactions by tax band, with the top two bands (£325,000 to £750,000 and £750,000 and above) combined to protect taxpayer confidentiality.

The council areas with the highest proportion of returns in the top grouped (£325k +) band were:

• East Renfrewshire at 40%
• East Lothian at 37%
• City of Edinburgh at 36%

One in 20 residential returns in City of Edinburgh fell into the highest underlying tax band (£750k+). These 580 returns accounted for nearly half of the 1,240 total returns within the £750k+ tax band in Scotland. East Lothian had the lowest proportion of residential returns in the bottom two tax bands combined (42%).

West Dunbartonshire had the highest proportion (65%) of transactions in the nil rate tax band (£0-145k). For 8 of the 32 local authorities, more than half of transactions fell into the nil-rate tax band. This is down from 11 in the previous year. A total of 37% of all residential transactions in Scotland fell into the nil-rate band, with 17% falling into the combined top two bands (£325k+).

1.7.5 Sub-Scotland: Non-residential conveyances

Sub-Scotland LBTT data is analysed by ITL 2 areas instead of local authorities for non residential returns, to minimise the risk of disclosing protected taxpayer information. 

ITL stands for International Territorial Levels which are geographical areas used in UK statistics. These areas are currently identical to the Europen Nomenclature of Units for Territorial Statistics which were used in previous versions of this publication.

Scotland is divided into five of these units, mainly by grouping together Council Areas. These five areas are: Highlands and Islands, North Eastern Scotland, Eastern Scotland, West Central Scotland, and Southern Scotland.

Figure 16: Estimates of non-residential LBTT declared due by ITL 2 area and year 

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Eastern Scotland consistently makes up the largest share of non-residential LBTT declared due, accounting for £80 million (42%) in 2022/23. The highest number of returns also comes from Eastern Scotland at 2,400 (34%).

All ITL 2 areas saw decreases in non-residential LBTT in 2022/23 compared with the previous year. West Central Scotland, Southern Scotland and Highlands and Islands saw fairly small reductions in comparison to North Eastern Scotland which saw a 51% drop, and Eastern Scotland which fell by 17%.

The number of non-residential returns received overall was very similar to last year, with a figure of 7,040 this year, compared to 7,050 last year. Western Scotland saw 9% fewer returns compared with 2021/22 and North Eastern Scotland saw a drop of 7%, while the other ITL 2 areas saw slight increases.

Southern Scotland and Highlands and Islands saw more gradual increases and did not experience the dip in 2020/21.

The significant drop in LBTT in North Eastern Scotland and Eastern Scotland despite relatively stable numbers of returns compared with the previous year reflects the fact that for non-residential LBTT, a small number of very high value transactions can greatly affect the total LBTT due. For this reason, care should be taken when interpreting annual trends in non-residential LBTT by ITL 2 area. 

Figure 17: Estimated number of non-residential returns by ITL 2 area and year 

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1.8 LBTT Reliefs

There are a number of tax reliefs which provide whole or partial relief from LBTT. Common reliefs include:

• First-Time Buyer relief, which currently relieves LBTT on the first £175,000 of the consideration payable for first time buyers, subject to conditions.
• Charities relief, where the buyer in a land transaction is a charity and certain conditions are met. 
• Group relief, where at the effective date of a land transaction the seller and buyer are both companies in the same group.

Table 10: Estimated LBTT revenue forgone to reliefs and number of LBTT returns received in which some LBTT revenue has been forgone to reliefs, by year (combined Residential and Non-Residential)

*This column is not the sum of the two preceding columns. Some returns may have relief on the LBTT and ADS, so they are only counted once in this column.

Due to known data quality issues with reliefs information collected from LBTT returns, figures in this section are presented as estimates. These issues only impact a small number of returns and the total figure for LBTT foregone to reliefs is not affected. Further information is available in Appendix C.

It is estimated that £115 million of LBTT revenue was forgone to reliefs in 2022/23, which represents a £17 million (13%)  decrease on the previous year. In the same period, total LBTT declared increased 5% and the total number of returns received was down by 6% (see Overview Section of this publication). The number of returns received where some LBTT was foregone to reliefs increased by just 1%.

Roughly 15% of all LBTT returns had some LBTT revenue foregone to reliefs in 2022/23, up from 14% in 2021/22. This continues the upward trend year on year for the percentage of LBTT returns with some LBTT foregone to reliefs, excluding 2020/21 when there was a temporary pause on First Time Buyer Relief.

ADS foregone to relief rose by almost £8 million (149%) in 2022/23, while the number of returns in which some ADS was foregone to relief increased by 181%. The three reliefs which account for the majority of both of these increases are:

• Relief for certain acquisitions of residential property
• Charities relief
• Relief for certain acquisitions by registered social landlords.

Detailed explanations of these reliefs are available on the relief section of the Revenue Scotland website. 

It is important to note that a small number of very high value reliefs can have a significant impact on the overall total figure, and cause year to year fluctuations.

First-time buyer relief was introduced in 2018, and largely accounts for the sharp increase in the number of returns with LBTT foregone to relief between 2018/19 and 2019/20. The steep decline in 2020/21 can be mostly attributed to the temporary increase in the nil-rate tax band. During this period, a large number of transactions which normally would have qualified for first time buyers relief, simply had no LBTT due, making the relief temporarily redundant. 

Table 11: Estimated LBTT revenue forgone to reliefs and number of LBTT returns received in which some LBTT revenue has been forgone to reliefs by type of property and year

Approximately 17% of residential returns in 2022/23 had some LBTT foregone to reliefs and 12% of non-residential returns claimed some form of relief. 

Residential returns made up 95% of returns in which some LBTT was forgone to reliefs in 2022/23. However, non-residential returns made up the majority of the total value of LBTT forgone to reliefs (79%).

First-Time Buyer Relief

First-Time Buyer Relief accounted for 91% of returns received in which some LBTT revenue was forgone to relief in 2022/23. Every year since its introduction, aside from in 2020/21, when there was a temporary increase to the nil-rate tax band, First-Time Buyer Relief has made up the majority of claims for relief. Despite accounting for the vast majority of claims for relief, Figure 19 shows that First-Time Buyer relief accounts for only a small portion of the estimated LBTT revenue foregone to reliefs. This is because First-Time Buyer relief provides a maximum of £600 relief from LBTT per transaction, as it only applies to the first £175,000 of the consideration. This is unlike other relief types which can relieve the entire tax liability of potentially much larger transactions.

Figure 18: Estimated LBTT revenue forgone to reliefs by type of relief and year

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Group relief typically makes up the majority of LBTT forgone to reliefs, accounting for 44% in 2022/23. Changes in the total reliefs are largely driven by changes in group relief. Group relief provides relief from LBTT where the seller and buyer are both companies in the same group. Where certain rules are met, this allows companies to move property within a corporate group structure without a liability for LBTT being incurred.

The second highest proportion of LBTT forgone to relief (17%) came from Charities relief. The third highest proportion (15%) came from Other reliefs, which groups together all reliefs outside the six biggest single contributors. More information about these reliefs can be found on the Revenue Scotland website. As with residential reliefs, a small number of high value transactions can have a significant impact on the total in this category. 

Executive Summary

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Land and Buildings Transaction Tax 

• £856 million in LBTT revenues were declared due during 2022/23. This record-high figure was driven mainly by residential LBTT and residential ADS, which rose by 12% and 19% respectively. The total LBTT revenue includes £176 million net Additional Dwelling Supplement (ADS) payments, some of which may be reclaimed at a later date.
• In 2022/23, residential conveyances accounted for about three-quarters (74% or £638 million) of total LBTT declared due, non-residential conveyances accounted for 22% (£191 million) and leases accounted for 3% (£26 million). Reviews of a lease accounted for less than 1% (£1 million).

• The total number of LBTT returns received in 2022/23 was 6% lower than in the previous year. This decrease was mainly driven by a reduction in residential conveyance returns.

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Residential Transactions 

• A record high (£638 million) for LBTT revenues from residential conveyances was recorded in 2022/23. This tops the previous high (£561 million) recorded in 2021/22. However, the number of residential LBTT returns received was down 7% from 2021/22.
• Residential LBTT revenue excluding ADS is dominated by transactions in the £325,000 to £750,000 band, which made up 60% of residential revenue in 2022/23 while making up 16% of residential returns. 
• 37% of residential returns received in 2022/23 were in the nil rate (£0 to £145,000) tax band, the lowest proportion on record, and continuing the year-on-year decrease from 53% in 2015/16.

Additional Dwelling Supplement 

• £206 million gross ADS was declared due in 2022/23, a 9% increase on the previous year. However, the number of returns with ADS declared due decreased from 25,140 to 24,650 in 2022/23. ADS was declared due for 24% of all residential conveyances in 2022/23, up from 23% in the previous year.
• The ADS rate increased from 4% to 6% on the 16th December 2022. This increased rate is partially responsible for the increase in gross ADS declared for 2022/23 compared to 2021/22.
• In 84% of residential ADS returns submitted in 2022/23, the taxpayer stated they did not intend to reclaim the ADS declared due, equalling the proportion from the previous year.
• 84% of ADS reclaims are made within one year of the original transaction.

Non-Residential Transactions 

• £191 million LBTT was declared due for non-residential conveyances in 2022/23. This is a 16% decrease from 2021/22. However, the number of non-residential transactions remained similar at 7,040.
• Each year so far, the largest 5% of transactions have contributed 71% to 75% of total LBTT revenues from non-residential conveyances, with a similar distribution for leases (64% to 74%). 

Leases

• Leases contributed £26 million LBTT revenue in 2022/23, the second highest annual total so far. The highest ever annual total was £29 million in 2018/19. 
• Both the number of lease returns received and the total LBTT due from leases remained fairly steady in comparison to 2021/22, with both figures increasing only slightly.
• Reviews of a lease accounted for approximately £1m of LBTT declared due in 2022/23. This makes up roughly 0.1% of total LBTT for the year. 
• 4,720 LBTT returns for reviews of a lease were received in 2022/23, an increase of 3% from 2021/22. 69% declared no change in LBTT due from the original lease, 19% declared additional LBTT due and 12% resulted in a claim for repayment of LBTT.

Sub-Scotland

• The City of Edinburgh accounted for £131 million in residential LBTT revenues (excluding ADS) in 2022/23, 28% of the total. The second largest contributor, Glasgow City, accounted for £37 million (8%), although Glasgow had a higher number of residential returns (11,740) then Edinburgh (11,390). 
• The proportion of residential conveyance returns in which the taxpayer declared ADS due, but did not intend to reclaim it, was highest in Dundee City (31%) and lowest in Midlothian (11%).

Reliefs

• £115 million of potential LBTT revenue was foregone to reliefs in 2022/23, with around 17,850 returns receiving relief. This represents 12% of the total potential LBTT revenue for the year, down from 14% in the previous year.
• Non-residential transactions accounted for the 79% of revenue forgone to reliefs in 2022/23.

Scottish Landfill Tax

• £110 million of SLfT was declared due in 2022/23, a decrease of 10% from 2021/22.
• Standard rate disposals account for 98% of SLfT declared due in 2022/23.
• Standard rate disposals were down from 1,312,400 tonnes in 2021/22 to 1,179,200 tonnes in 2022/23, a decrease of 10%. Lower rate disposals increased by 1%.

Annual Summary of Trends in the Devolved Taxes 2022/23

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Introduction

Revenue Scotland is responsible for the collection and management of the devolved Land and Buildings Transaction Tax (LBTT) and Scottish Landfill Tax (SLfT). 

This annual statistics publication summarises annual trends in the devolved taxes. It also provides more detailed data and commentary than our other more regular statistical outputs for example: 

• Local authority estimates of LBTT declared due and the number of LBTT returns received.
• Estimates of LBTT revenue forgone to reliefs.
• Taxable (SLfT) disposals by European Waste Catalogue (EWC) code.

This publication mainly focuses on data from the 2022/23 financial year, with comparisons to the four previous years. Some charts span the full period since Revenue Scotland began collecting tax, dating back to April 2015. Data spanning back to this date for most figures and tables included in this publication can be found in our previous annual publications. 

The LBTT data presented in this publication comes from LBTT returns. Returns are grouped by year based on the date the return was received by Revenue Scotland (the submitted date). Appendix A explains how data on this basis relates to data on an effective date (date of transaction) basis.

Appendix B explains how Revenue Scotland’s Official Statistics publications relate to its Annual Report and Financial Statements, and the differences in how the figures are compiled.

Revenue Scotland also publishes monthly official statistics on LBTT and quarterly official statistics on SLfT. More up-to-date high-level statistics are available from these two publications, but they do not contain some of the more detailed data found in this publication. Both can be found on the Revenue Scotland website and the open data is found on statistics.gov.scot.

This publication is an Official Statistics publication for Scotland. Official and Accredited Official Statistics are produced to high professional standards set out in the Code of Practice for Official Statistics by professionally independent statisticians. Both undergo regular quality assurance reviews to ensure that they meet customer needs and are produced free from any political interference.

For any further information please contact us at statistics@revenue.scot

This publication is Crown Copyright and is released under the Open Government Licence. You are free to reuse this information provided the source is acknowledged.

Scottish Aggregate Tax (SAT)

The third devolved tax will be Scottish Aggregates Tax which will replace the UK Aggregates Levy in Scotland. Revenue Scotland has worked closely with the Scottish Government in the development of the Bill, which was published on 15 November 2023. 

We have established our implementation programme and will continue to work with the Scottish Government, partners, and wider stakeholders to ensure the safe and secure delivery of the new tax.      

• Read more about Scottish Aggregate Tax (SAT)

Revenue Scotland update on the Scottish Aggregates Tax (SAT)

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Notes to the Accounts

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1. Statement of accounting policies

1.1 Basis of accounting 

In accordance with the accounts direction issued by the Scottish Ministers under section 19(4) of the Public Finance and Accountability (Scotland) Act 2000, these financial statements have been prepared in accordance with the 2022-23 Government Financial Reporting Manual (FReM), issued by HM Treasury. The accounting policies contained in the FReM apply International Financial Reporting Standards (IFRS) as adapted or interpreted for the public sector context. The accounting policies have been applied consistently in dealing with items considered material in relation to the accounts. 

The income and associated expenditure contained within these statements are those flows of funds which Revenue Scotland handles on behalf of the Scottish Consolidated Fund and where it is acting as agent rather than principal. 

The Devolved Taxes Account have been prepared on a going concern basis, which provides that the organisation will continue in operational existence for the foreseeable future.

1.2 Accounting convention 

The Devolved Taxes Account have been prepared in accordance with the historical cost convention. Taxes (including repayments) are accounted for on an accruals basis and where necessary, estimation techniques have been selected as the most appropriate for the purpose of giving a true and fair view in accordance with the principles set out in International Accounting Standard (IAS) 8 Accounting Policies, Changes in Accounting Estimates and Errors. 

Critical accounting judgements and key sources of estimation 

The preparation of financial statements in accordance with IFRS requires the use of certain accounting estimates. It also requires management to exercise judgement in the process of applying accounting policies. For the Devolved Taxes Account the significant assumptions and estimates are set out in the accounting policies and/or notes to the accounts. The 31st May has been used as the cut-off point for accrual purposes.

1.3 New accounting standards 

In accordance with IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors, changes to International Financial Reporting Standards (IFRS) that have been issued but not yet effective have been reviewed for impact on the financial statements in the period of initial application. There are no updates to the standards that are considered to be relevant to Revenue Scotland’s Devolved Taxes Account. 

1.4 The tax gap 

The tax gap is not recognised in the Devolved Taxes Account. The tax gap is the difference between the amount of tax that should, in theory, be collected by Revenue Scotland (the theoretical liability), against what is actually collected. The theoretical liability represents the tax that would have been paid if all individuals and companies complied with both the letter of the law and Revenue Scotland’s interpretation of the intention of the Scottish Parliament in setting law (referred to as the spirit of the law). Revenue Scotland undertakes compliance work in order to limit the tax gap.

1.5 Financial instruments 

Revenue Scotland collects tax revenue on behalf of the Scottish Ministers for the Scottish Consolidated Fund, therefore financial instruments play a limited role in creating and managing risk. The only financial instruments within the accounts are financial assets in the form of receivables and financial liabilities in the form of payables. 

1.6 Revenue recognition – Taxation 

Taxes are measured in accordance with IFRS 15: Revenue from Contracts with Customers. They are measured at the fair value of amounts received or receivable, net of repayments. Revenue is recognised when:

• A taxable event has occurred, the revenue can be measured reliably and it is probable that the economic benefits from the taxable event will flow to the Scottish Consolidated Fund. A taxable event therefore occurs when a liability arises to pay a tax. 

Repayments of Additional Dwelling Supplement are recognised when the taxpayer or agent submits a claim for repayment creating an obligating event, and the sale of the previous main residence falls within the reported financial year or earlier.

1.7 Revenue recognition – Penalties and Interest 

Penalties and interest are measured in accordance with IFRS 15. They are measured at the fair value of amounts received or receivable. Revenue is recognised when: 

• A penalty or interest charge is validly imposed and an obligation to pay arises. Penalty and interest revenue is de-recognised: 
• When a penalty is cancelled following the correction of a tax return arising from a minor error by the taxpayer or agent; 
• Where a penalty is cancelled following a review by Revenue Scotland; and 
• Where a taxpayer’s appeal against the penalty is upheld by the Scottish Tribunals. 

Where penalty and interest revenue has been previously recognised and is later deemed uncollectable for reasons other than those shown above, this is recorded as an expense at the date of the decision. 

1.8 Contingent assets 

IAS 37: Provisions, Contingent Liabilities and Contingent Assets, defines a Contingent Asset as a possible asset, whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the entity’s control. Contingent assets often cannot be reliably quantified; where values can be determined these have been provided. 

Contingent assets are not recognised within the Statement of Revenue and Expenditure or Statement of Financial Position but are disclosed as notes within Revenue Scotland’s accounts.

1.9 Contingent liabilities 

IAS 37: Provisions, Contingent Liabilities and Contingent Assets, defines a Contingent Liability as a possible liability, whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the entity’s control. Contingent liabilities often cannot be reliably quantified; where values can be determined these have been provided. 

Contingent liabilities are not recognised within the Statement of Revenue and Expenditure or Statement of Financial Position but are disclosed as notes within Revenue Scotland’s accounts. 

1.10 Receivables 

Revenue Scotland determines impairments in accordance with IFRS 9: Financial Instruments. Impairments have been measured by applying the credit loss model set out in IFRS 9. The impairment model in IFRS 9 is based on the premise of providing for expected losses utilising available information and considering the probability of collection.

2. Revenue and other income 

2.1 Taxes

Land and Buildings Transaction Tax is payable on the acquisition of a chargeable interest in, or over, land in Scotland. 

Additional Dwelling Supplement (ADS) is payable on the purchase of additional residential properties in Scotland. It is repayable where the taxpayer’s previous main residence is sold within 18 months of the purchase of the additional property. Under the Coronavirus (Scotland) (No.2) Act 2020, for buyers that entered into transactions with effective dates between 24 September 2018 and 24 March 2020 the 18-month period in which some buyers can dispose of a previous main residence and still be eligible for a repayment of the ADS was increased to 36 months rather than 18 months. 

Scottish Landfill Tax is payable on disposals of waste material in Scotland made by way of landfill.

2.2 Penalties and interest

Penalties are charged on the late receipt of tax returns, late payments or other reasons permitted under the RSTPA. Penalties are recognised when a penalty notice has been issued to the taxpayer. Interest is charged on the late payment of tax returns or penalties.

3. Expenditure 

3.1 Interest paid

Interest payable by Revenue Scotland on the repayment of any tax or penalties.

3.2 Revenue losses and gains

Revenue losses and gains are made up of revenue write-offs and the movement in the impairment of receivables (further information can be found in Note 4.2 Change to impairments). Debts written off are amounts that, after all reasonable action has been taken and following careful appraisal, have been considered to be irrecoverable. Impairment reflects the prospects of recovery in relation to debt recovery action.

4. Receivables 

4.1 Amounts due:

Receivables represents taxpayer liabilities where a liability has been assessed and not paid at the balance sheet date, including amounts due from those on whom financial penalties have been imposed prior to the balance sheet date, but not paid at that date. 

Accrued Revenue Receivable represents taxpayer liabilities which relate to the financial year but for which the liability had not been assessed as at the balance sheet date. These may include estimates made by Revenue Scotland of those activities.

4.2 Change to impairments

Impairments are debts which are currently being pursued but which are considered likely to be irrecoverable in the longer term. Receivables in the Statement of Financial Position are reported after the deduction of the estimated value of impairments. The estimate is based on a number of factors including where legal action has been initiated.

5. Cash

Cleared funds are paid over to the Scottish Consolidated Fund on a monthly basis in arrears. The above balances represent funds received from taxpayers which had not been paid over to the Scottish Consolidated Fund as at 31 March 2023 and which were paid over during 2023-24.

6. Payables and on account balances

Taxes are structured in such a manner that taxpayers are entitled to amend their return within twelve months of the effective date of the transaction and claim a repayment. Revenue repayable relates to outstanding repayments of tax or penalties, including claims for repayment of Additional Dwelling Supplement, where the amount has been established at the balance sheet date. It also includes any credit balances which may be repayable in the future.

7. Balance due to the Scottish Consolidated Fund Account

Only cleared funds are paid over to the Scottish Consolidated Fund. The balance represents accrued income and amounts that remain outstanding or funds which are still to paid over to the Scottish Consolidated Fund at the balance sheet date.

8. Contingent assets 

Contingent assets can arise as a result of a deferral being granted by Revenue Scotland, or as a result of appeals to the Scottish Tax Tribunals or as a result of an enquiry into tax returns received.

Deferrals

Property buyers can make applications to Revenue Scotland to defer the LBTT payable on a land transaction where:

the whole or part of the chargeable consideration is contingent or uncertain and;

the chargeable consideration becomes payable more than six months after the effective date of the transaction. 

This could include, for example, a situation where additional consideration is payable by the buyer if planning permission is obtained after the sale. 

Where a deferral has been granted, the amount of tax due is not recognised within the financial statements until the chargeable consideration materialises. The estimated timings are:

Tribunal cases 

Those aggrieved by an appealable decision made by Revenue Scotland may dispute that decision by requesting that Revenue Scotland carry out a review and/or by making an appeal to the Tax Chamber of the First-tier Tribunal for Scotland (FTTS). Mediation may also be entered into at any time. 

Where appeals have been made to either the FTTS or Upper Tribunal, the tax revenue and any associated penalties and interest are not recognised in the Statement of Revenue and Expenditure or Statement of Financial Position but are disclosed as contingent assets due to the uncertainty of the outcome.

Further information on the nature and value of these contingent assets cannot be disclosed as to do so may result in the disclosure of protected taxpayer information.

Enquiries 

Revenue Scotland has the power to open an enquiry which can cover anything contained, or required to be contained, in a tax return relating to: 

• Whether the taxpayer is liable to pay tax; and 
• The amount of tax due. 

The enquiry has to be closed within three years of the filing date of the tax return where the filing date for LBTT is 30 days after the effective date of the transaction and for SLfT is 44 days after the end of the relevant quarter. At the conclusion of the enquiry Revenue Scotland will advise the taxpayer of the outcome and whether an amendment to the tax return and/ or the tax due is required. When the enquiry is completed and a closure notice issued, any additional tax or reduction in tax is recognised in the financial statements at the date of closure. 

Revenue Scotland has a number of open enquiries into LBTT and SLfT tax returns but management are of the opinion that: 

• Some of these enquiries are at an early stage and it may not yet be possible to assess with certainty the amount of tax subject to the enquiry; 
• To disclose values of additional tax in these circumstances may prejudice the outcome of those enquiries. 

For these reasons a value for contingent assets relating to enquiries has not been disclosed in these financial statements.

9. Contingent liabilities 

Additional Dwelling Supplement Property buyers who have included ADS in their LBTT tax return are entitled to seek a repayment of the supplement if they meet certain criteria, including selling their previous main residence within 18 months of the purchase of their new property. The increased 36 month period referred to in note 2 under the Coronavirus (Scotland) (No.2) Act 2020 expired in March 2023. When they submit a claim then this is recognised in the accounts in accordance with our accounting policy. 

However, where no such claim has been received there is not an “obligating event” in terms of IAS 37 – Provisions, Contingent Liabilities and Contingent Assets, and as a result any amounts that may be due to taxpayers are treated as a contingent liability. 

Taxpayers are invited to indicate their intention to sell their previous main residence and seek repayment of ADS when submitting their tax return. Where taxpayers have indicated in their tax return that it is their intention to sell their previous main residence but have not done so by the end of the financial year, then the potential refund is disclosed as a contingent liability. For 2022-23 all such amounts of ADS, are estimated as £37m (2021-22: £46m). It should be noted that this is an indicative figure, based on the information received from taxpayers in their tax return. 

Enquiries 

As outlined in Note 8 Revenue Scotland has a number of open enquiries into LBTT and SLfT tax returns which may, or may not, result in additional tax or a reduction in tax liabilities. Management are of the opinion that: 

• Some of these enquiries are at an early stage and it may not yet be possible to assess with certainty the amount of tax subject to the enquiry; 
• To disclose values of possible tax in these circumstances may prejudice the outcome of those enquiries. 

For these reasons a value for contingent liability relating to enquiries has not been disclosed in these financial statements.

10. Events after the reporting period 

A taxpayer dispute that was subject to the Tribunal process led to an agreement to conclude the litigation after the end of the reporting period. The revenue that had previously been reported as a contingent asset has been incorporated into the financial statements as an adjusting post-balance sheet event.

Devolved Taxes Account 2022-23: Financial Statements

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Devolved Taxes Account 2022-23 Financial Statements

Statement of Revenue and Expenditure

For the Year Ended 31 March 2023

There were no recognised gains or losses accounted for outside the Statement of Revenue and Expenditure.

The notes on pages 27–41 form part of these financial statements.

Statement of Financial Position

as at 31 March 2023

The notes on pages 27–41 form part of these financial statements.

The Chief Executive and Accountable Officer of Revenue Scotland authorised these financial statements for issue on

Elaine Lorimer – Chief Executive of Revenue Scotland and Accountable Officer

Statement of Cash Flows

For the year ended 31 March 2023

The notes on pages 27–41 form part of these financial statements.

Independent Auditor’s Report

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Independent Auditor’s report to the Auditor General for Scotland and the Scottish Parliament

Reporting on the audit of the financial statements

Opinion on financial statements

I have audited the financial statements in the Revenue Scotland Devolved Taxes Account for the year ended 31 March 2023 under the Public Finance and Accountability (Scotland) Act 2000. The financial statements comprise the Statement of Revenue and Expenditure, the Statement of Financial Position, the Statement of Cash Flows and the notes to the financial statements. The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international accounting standards, as interpreted and adapted by the 2022/23 Government Financial Reporting Manual (the 2022/23 FReM). 

In my opinion the accompanying financial statements:

• give a true and fair view of the state of affairs of the account as at 31 March 2023 and of the net revenue for the year then ended; 
• have been properly prepared in accordance with UK adopted international accounting standards, as interpreted and adapted by the 2022/23 FReM; and
• have been prepared in accordance with the requirements of the Public Finance and Accountability (Scotland) Act 2000 and directions made thereunder by the Scottish Ministers.

Basis for opinion 

I conducted my audit in accordance with applicable law and International Standards on Auditing (UK) (ISAs (UK)), as required by the Code of Audit Practice approved by the Auditor General for Scotland. My responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of my report. I was appointed by the Auditor General on 3 April 2023. My period of appointment is five years, covering 2022/23 to 2026/27. I am independent of the account in accordance with the ethical requirements that are relevant to my audit of the financial statements in the UK including the Financial Reporting Council’s Ethical Standard, and I have fulfilled my other ethical responsibilities in accordance with these requirements. Non-audit services prohibited by the Ethical Standard were not provided to the account. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.

Conclusions relating to going concern basis of accounting 

I have concluded that the use of the going concern basis of accounting in the preparation of the financial statements is appropriate. 

Based on the work I have performed, I have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the account’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from when the financial statements are authorised for issue. 

These conclusions are not intended to, nor do they, provide assurance on the account’s current or future financial sustainability. However, I report on the account’s arrangements for financial sustainability in a separate Annual Audit Report available from the Audit Scotland website. 

Risks of material misstatement 

I report in my Annual Audit Report the most significant assessed risks of material misstatement that I identified and my judgements thereon.

Responsibilities of the Accountable Officer for the financial statements 

As explained more fully in the Statement of the Accountable Officer’s Responsibilities, the Accountable Officer is responsible for the preparation of financial statements that give a true and fair view in accordance with the financial reporting framework, and for such internal control as the Accountable Officer determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Accountable Officer is responsible for using the going concern basis of accounting unless there is an intention to discontinue the account’s operations. 

Auditor’s responsibilities for the audit of the financial statements 

My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the decisions of users taken on the basis of these financial statements.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. I design procedures in line with my responsibilities outlined above to detect material misstatements in respect of irregularities, including fraud. Procedures include: 

• using my understanding of the central government sector to identify that the Public Finance and Accountability (Scotland) Act 2000 and directions made thereunder by the Scottish Ministers are significant in the context of the account; 
• inquiring of the Accountable Officer as to other laws or regulations that may be expected to have a fundamental effect on the operations of the account; 
• inquiring of the Accountable Officer concerning the account’s policies and procedures regarding compliance with the applicable legal and regulatory framework; 
• discussions among my audit team on the susceptibility of the financial statements to material misstatement, including how fraud might occur; and 
• considering whether the audit team collectively has the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations. 

The extent to which my procedures are capable of detecting irregularities, including fraud, is affected by the inherent difficulty in detecting irregularities, the effectiveness of the account’s controls, and the nature, timing and extent of the audit procedures performed.

Irregularities that result from fraud are inherently more difficult to detect than irregularities that result from error as fraud may involve collusion, intentional omissions, misrepresentations, or the override of internal control. The capability of the audit to detect fraud and other irregularities depends on factors such as the skilfulness of the perpetrator, the frequency and extent of manipulation, the degree of collusion involved, the relative size of individual amounts manipulated, and the seniority of those individuals involved. 

A further description of the auditor’s responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website www.frc.org.uk/auditorsresponsibilities. This description forms part of my auditor’s report.

Reporting on regularity of expenditure and income

Opinion on regularity 

In my opinion in all material respects the expenditure and income in the financial statements were incurred or applied in accordance with any applicable enactments and guidance issued by the Scottish Ministers. 

Responsibilities for regularity 

The Accountable Officer is responsible for ensuring the regularity of expenditure and income. In addition to my responsibilities in respect of irregularities explained in the audit of the financial statements section of my report, I am responsible for expressing an opinion on the regularity of expenditure and income in accordance with the Public Finance and Accountability (Scotland) Act 2000.

Reporting on other requirements 

Other information 

The Accountable Officer is responsible for the other information in the Revenue Scotland Devolved Taxes Account. The other information comprises the Foreword and the Accountability Report. 

My responsibility is to read all the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or my knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If I identify such material inconsistencies or apparent material misstatements, I am required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work I have performed, I conclude that there is a material misstatement of this other information, I am required to report that fact. I have nothing to report in this regard. 

My opinion on the financial statements does not cover the other information and I do not express any form of assurance conclusion thereon except on the Foreword and Governance Statement to the extent explicitly stated in the following opinions prescribed by the Auditor General for Scotland.

Opinions prescribed by the Auditor General for Scotland on the Foreword and Governance Statement 

In my opinion, based on the work undertaken in the course of the audit: 

• the information given in the Foreword for the financial year for which the financial statements are prepared is consistent with the financial statements and that report has been prepared in accordance with the Public Finance and Accountability (Scotland) Act 2000 and directions made thereunder by the Scottish Ministers; and 
• the information given in the Governance Statement for the financial year for which the financial statements are prepared is consistent with the financial statements and that report has been prepared in accordance with the Public Finance and Accountability (Scotland) Act 2000 and directions made thereunder by the Scottish Ministers.

Matters on which I am required to report by exception 

I am required by the Auditor General for Scotland to report to you if, in my opinion: 

• adequate accounting records have not been kept; or 
• the financial statements are not in agreement with the accounting records; or 
• I have not received all the information and explanations I require for my audit. 

I have nothing to report in respect of these matters. 

Conclusions on wider scope responsibilities 

In addition to my responsibilities for the annual report and accounts, my conclusions on the wider scope responsibilities specified in the Code of Audit Practice are set out in my Annual Audit Report.

Use of my report 

This report is made solely to the parties to whom it is addressed in accordance with the Public Finance and Accountability (Scotland) Act 2000 and for no other purpose. In accordance with paragraph 108 of the Code of Audit Practice, I do not undertake to have responsibilities to members or officers, in their individual capacities, or to third parties.

Pauline Gillen 

Audit Director 

Audit Scotland 

4th Floor 8 Nelson Mandela Place 

Glasgow 

G2 1BT

Accountability Report

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Corporate Governance Report

Statement of the Accountable Officer’s responsibilities

Under section 19(4) of the Public Finance and Accountability (Scotland) Act 2000, Scottish Ministers have directed Revenue Scotland to prepare for each financial year a statement of accounts in the form and on the basis set out in the Accounts Direction. The accounts are prepared on an accruals basis and must give a true and fair view of the state of affairs of Revenue Scotland and of its income and expenditure, Statement of Financial Position and cash flows for the financial year. 

In preparing the accounts, the Accountable Officer is required to comply with the requirements of the Government Financial Reporting Manual (FReM) and in particular to: 

• observe the Accounts Direction issued by Scottish Ministers, including the relevant accounting and disclosure requirements, and apply suitable accounting policies on a consistent basis 
• make judgements and estimates on a reasonable basis X state whether applicable accounting standards as set out in the Government Financial Reporting Manual have been followed, and disclose and explain any material departures in the financial statements 
• prepare the financial statements on a going concern basis 
• confirm that the Annual Report and Accounts as a whole is fair, balanced and understandable and take personal responsibility for the Annual Report and Accounts and the judgements required for determining that it is fair, balanced and understandable.

The Permanent Secretary of the Scottish Government (SG), who is the Principal Accountable Officer for the Scottish Administration has designated, in accordance with sections 14 and 15 of the Public Finance and Accountability (Scotland) Act 2000, the Chief Executive of Revenue Scotland as Accountable Officer for Revenue Scotland. 

The responsibilities of an Accountable Officer, including responsibility for the propriety and regularity of the public finances for which they are answerable, for keeping proper records and for safeguarding the Revenue Scotland’s assets, are set out in the Scottish Public Finance Manual. 

The Accountable Officer may consult with the SG Chief Financial Officer (CFO) on any aspects of the duties applying to Accountable Officers in the Scottish Administration. The Accountable Officer must consult the CFO on any action which they consider is inconsistent with their duties on financial, regulatory or propriety grounds, and specifically where they seek written authority from the Scottish Ministers or a direction from the Board of Revenue Scotland. In practice, the Chief Executive will delegate authority widely to other employees of Revenue Scotland but cannot, on that account, disclaim responsibility. The Chief Executive is responsible for informing the Principal Accountable Officer about any complaints about Revenue Scotland accepted by the Scottish Public Services Ombudsman (SPSO) for investigation and about the response to any subsequent recommendations from the SPSO.

As the Accountable Officer, I have taken all the steps that I ought to have taken to make myself aware of any relevant audit information and to establish that Revenue Scotland’s auditors are aware of that information. So far as I am aware, there is no relevant audit information of which the auditors are unaware. 

I confirm that this Annual Report and Accounts, taken as a whole, is fair, balanced and understandable, and I take personal responsibility for the Annual Report and Accounts and the judgements required for determining that it is fair, balanced and understandable.

Governance Statement 

In the paragraphs below, I report on the governance arrangements in place within Revenue Scotland. 

Governance Framework 

Revenue Scotland is responsible for the administration and collection of Scotland’s wholly devolved taxes. The relevant powers and duties of Revenue Scotland, and of the Scottish Ministers are set out in the Revenue Scotland and Tax Powers Act 2014. Scottish Ministers are responsible for appointing the Board of Revenue Scotland following a public appointment exercise, regulated by the Commissioner for Ethical Standards in Public Life in Scotland.

Ministers must not direct, or otherwise seek to control Revenue Scotland in the exercise of its functions but they may give guidance. This guidance must be published and laid before the Scottish Parliament unless Ministers consider that to do so would prejudice the effective exercise by Revenue Scotland of its functions. Scottish Ministers are responsible for setting rates, bands and thresholds relating to the devolved taxes, subject to the approval of the Scottish Parliament. 

The Board of Revenue Scotland is collectively responsible for the leadership and direction of the organisation and for ensuring that it carries out its statutory functions effectively and efficiently. It may delegate any of its functions to an individual Board member, a committee of the Board, the Chief Executive, or any other staff member, but it will retain its responsibility for carrying out its function. 

As the Chief Executive of Revenue Scotland, I am employed by, and accountable to, the Board of Revenue Scotland for the day-to-day running of the organisation and its operational performance. In this role I seek assurance that appropriate controls are in place across the organisation, and in respect of the partners whom we rely on to support us in delivering our objectives, and I can confirm that these have been in operation during 2022-23 and to the date of signing these accounts. 

I am supported by the Senior Leadership Team (SLT), who oversee the day-to-day business of Revenue Scotland, with each member taking responsibility for a specific area. The SLT is made up of the Chief Executive, the Head of Tax, the Head of Corporate Functions and the Head of Legal Services.

Operation of the Board and committees 

The Board is responsible for the functions and powers of Revenue Scotland and delegates authority to staff through a Scheme of Internal Delegation. The Board sets the strategic direction for the organisation, oversees Revenue Scotland’s work and monitors performance including the design and operation of risk and governance frameworks. They do this through scrutiny and, where appropriate, approval of: 

• corporate plans and business plans 
• key strategies and policies 
• X regular reports, including reports relating to risk management, performance, tax compliance, business continuity, staff, health and safety, and changes in the devolved taxes 
• scrutiny of the Annual Reports and Accounts 
• reports from the Audit and Risk and Staffing and Equalities Committees 
• strategic engagement with key partners and customers. 

I can report that during 2022-23 the Board met on seven occasions including a strategy meeting (2021-22: eight). During this time the Board scrutinised and considered a number of specific matters including: 

• decisions relating to the Scottish Landfill Communities Fund 
• oversight of Revenue Scotland’s review of its future operating model and approach to hybrid working 
• oversight of tax and litigation cases and the implications for the organisation following the outcome
• strategic oversight of the development of our Tax Settlement and Litigation Principles 
• reviewing the terms of reference for the Staffing and Equalities Committee to ensure that it continues to meet the needs 
• approval of revisions to governance documents including the Scheme of Internal Delegation and the Code of Conduct for Revenue Scotland Board members.

Audit and Risk Committee 

The purpose of the Audit and Risk Committee is to support the Board and Accountable Officer by reviewing the comprehensiveness, reliability and integrity of the assurances produced in support of the financial statements. The terms of reference of the committee are published on Revenue Scotland’s website within the Board’s standing orders. The committee fulfils its role through: 

• scrutiny of risk management arrangements
• regular liaison with internal and external audit and scrutiny of their plans and reports
• considering and monitoring of responses to recommendations from internal and external auditors and other bodies
• review of the certificates of assurance produced by management as part of the financial reporting process and the Chief Executive’s governance statement, and
• overseeing the financial reporting process

Members of the committee during 2022-23 were Martin McEwen (Chair), Simon Cunningham and Robert MacIntosh. Lynn Bradley served until June 2022. 

The committee is also attended by the Chief Executive, Head of Corporate Functions, Head of Legal Services, Head of Tax, Head of Governance, the Chief Accountant and representatives of internal and external audit as well as other staff as required. 

I can report that during 2022-23 the committee met seven times (2021-22: five). 

The committee reviewed its effectiveness, using the checklist set out in the Scottish Government’s Audit Committee Handbook, in early 2023-24 and found no issues of concern which could affect its normal function.

Staff and Equalities Committee 

The Staffing and Equalities Committee advises and provides assurance to the Revenue Scotland Board and Accountable Officer on issues relating to: people; equality, diversity and inclusion; and health, safety and wellbeing. 

During 2022-23 the Revenue Scotland Board reviewed the operation of the committee and agreed to pilot changes during 2023-24 aimed at ensuring a more strategic focus for the committee. 

The terms of reference for the committee are published on Revenue Scotland’s website within the Board’s Standing Orders. 

The committee comprised three Board members during 2022-23; Jean Lindsay (Chair), Idong Usoro and Ken Macintosh. John Whiting served until June 2022. Staff attendees comprise the Chief Executive, Head of Corporate Functions, Head of Legal Services, Head of Tax, Head of People Services and Head of Governance. Further staff members attend as required. 

I can report that during 2022-23 the committee met three times (2021-22: three) and engaged in a number of relevant matters including supporting the development and scrutiny of:

• the People Strategy and subsequent action plan
• workforce planning
• health, safety and wellbeing
• equality and diversity.

Assurances provided to the Chief Executive 

I have received written assurances from members of my Heads of Service who have responsibility for the operation and effectiveness of internal controls within the Tax, Legal and Corporate Functions teams. No significant matters were identified through this process. 

The 2021-22 report highlighted the need to continue to strengthen health and safety systems within Revenue Scotland. I am pleased to report that progress has been made over the last year, particularly in respect of the arrangements for landfill site visits. At the time of writing, I am pleased to report that landfill site visits by Revenue Scotland staff are now able to resume. As we look ahead to the Scottish Aggregates Tax coming on stream, we are committed to further strengthening our health and safety controls as we become exposed to an additional high risk industry. We recognise the importance of proactively addressing potential risks and ensuring compliance with regulatory requirements in order to provide a safe system of work for our staff. 

I have received assurance from the Accountable Officer of the Scottish Environment Protection Agency (SEPA) in respect of the statutory functions delegated to them by Revenue Scotland. No significant issues were raised with me as part of this process. 

For those services for which Revenue Scotland receives from the Scottish Government, I have received assurance from the Scottish Government’s Chief Financial Officer in respect of financial systems, the Scottish Government’s Director for People in respect of Human Resources (HR) services and payroll systems shared with Revenue Scotland and from the Scottish Government’s Director of Digital, in respect of digital corporate services shared with Revenue Scotland. No significant issues were raised with me as part of these. 

In conclusion, I can confirm that, based on the aforementioned written assurances received, there were no significant control weaknesses identified in the period under review.

Report on personal data incidents 

Revenue Scotland manages, maintains and protects all information according to the requirements of relevant legislation, its own information policies and best practice. 

Revenue Scotland has an Information Assurance governance structure which prioritises and manages information risks. 

The governance structure: 

• protects the organisation, its staff and our taxpayers from information risks where the likelihood of occurrence and the consequences are significant 
• ensures adherence with statutory duties and 
• assists in safeguarding Revenue Scotland’s information assets. 

Revenue Scotland has a Senior Information Risk Owner (SIRO) and a number of Information Asset Owners (IAOs), who provide assurance to the SIRO that proper controls are in place. The SIRO role is to ensure information security policies and procedures are fit for purpose and are reviewed and implemented across all of Revenue Scotland’s business functions.

The IAOs are tasked with ensuring compliance with statutory duties, knowing what information assets they ‘own’ and what information they handle, along with the relevant security requirements, sensitivity, importance and protocols for sharing of information assets. 

During the course of the year, there were eight issues relating to minor data losses which were reported and dealt with internally. The losses were resolved quickly and mitigations put in place. None of the losses met the threshold of being reportable to the Information Commissioner’s Office. There were no security incidents involving any physical losses such as paper files or laptops.

Parliamentary scrutiny 

As a Non-Ministerial Office, Revenue Scotland is accountable to the Scottish Parliament and, as such, can be called to appear before parliamentary committees to provide updates on operational matters, give evidence on tax related matters or provide written statements. Revenue Scotland’s Corporate Plan, supporting legislation and this Annual Report are published documents. The Corporate Plan 2021-24, on which this document reports, was approved by Scottish Ministers and laid before the Scottish Parliament in November 2021 and this report will be laid before Parliament in November 2023. 

Corporate plans, all annual reports and accounts and minutes of Revenue Scotland Board meetings are available on our website.

Internal Audit 

The Scottish Government’s Directorate for Internal Audit and Assurance (DIAA) provide Revenue Scotland’s internal audit service. 

DIAA produce an annual audit plan which is reviewed by the Audit and Risk Committee, who provide advice on the plan to the Board and the Accountable Officer. Regular updates on progress against the audit plan are presented by DIAA to the Audit and Risk Committee’s meetings. 

During the year, DIAA completed audits on the following: 

• The review of Equalities and Diversity evaluated Revenue Scotland’s approach to embedding consideration of equality and diversity as part of strategic and operational decision-making. An upper-end of ‘reasonable’ assurance rating was awarded. The report indicated that Revenue Scotland was well placed to achieve its ambition to fully embed consideration of equality and diversity throughout its decision-making. Areas of improvement were identified which will: help ensure that a greater focus given at the strategic level; that effort is focused on areas of greatest impact and need; and that communications around outcomes are targeted those who will benefit most.
• The review of Litigation Decisions considered Revenue Scotland’s processes and governance around taking and responding top litigation decisions. An upper-end of ‘reasonable’ assurance rating was awarded. The report concluded that the organisation had developed an effective approach to litigation decisions. Areas for further improvement were identified to: further formalise the process and bring greater clarity and transparency to support those involved; build in resilience and scalability; and identify further opportunities to enhance processes.
• The review of Revenue Scotland’s Hybrid Working Pilot examined whether the organisation’s approach to considering and piloting hybrid working supports conclusions reached regarding next steps in moving out of the pilot and into business as usual. A ‘Substantial’ assurance rating was awarded in respect of this review. The report supported the approach that had been taken, which was seen to reflect good practice, and the conclusions reached regarding the next steps in moving out of the pilot and into the next stage

In addition, a follow-up review was conducted in respect of the 2021-22 Review of Capability and Capacity. This review considered the work that had been undertaken to better understand Revenue Scotland’s organisational capacity and to better understand what is optimum for the organisation. The review concluded further work was required and commended the good progress that had been made in researching available data and understanding the approaches taken in other organisations. 

The overall annual assessment of Revenue Scotland’s internal controls provided by DIAA is ‘Substantial’. This means that DIAA continues to view Revenue Scotland’s risk, governance and control procedures to be effective in supporting the delivery of its objectives. 

This is the third year running that Revenue Scotland has achieved such a rating and is a huge achievement for the organisation. This rating is testament to the importance placed on ensuring that risk, governance and control procedures are effective and continually reviewed and improved. 

DIAA noted that their work consistently obtains evidence of a strong culture and ‘tone from the top’ regarding the maintenance of control over key processes and embedding effective governance. They also welcomed the action that had taken place to build in further resilience to staff turnover, which was an issue identified in their previous annual assurance report. 

Members of the both the Board and the Audit and Risk Committee are delighted with this achievement and are committed to ensuring that this high standard is maintained in future years.

External Audit 

External Audit is provided by Audit Scotland. Pauline Gillen, Audit Director is appointed under the Public Finance and Accountability (Scotland) Act 2000 to carry out the external audit of Revenue Scotland and the devolved taxes. During the year, the Audit and Risk Committee scrutinised Audit Scotland’s audit plan and received regular updates from them. The Independent Auditor’s Report can be found on page 17. 

As part of the 2021-22 audit undertaken by Audit Scotland, two matters were highlighted for attention, namely:

Audit Scotland has reviewed these during their audit of 2022-23 and reported its conclusions in its Annual Audit Report 2022-23. Audit Scotland identified a small number of control weaknesses during the audit. These related to: 

- one instance of a lack of evidence authorising the creation of a new user account on SETS; 

- no regular account management meetings with the supplier of the tax finance system. 

Arrangements have been put in place to correct these weaknesses.

Assessment of corporate governance 

Revenue Scotland has in place a system of internal controls and policies which are designed to safeguard its assets, data and ensure the reliability of financial records in relation to operational and tax duties. 

I have ensured that these controls have been subject to review by management on a regular basis. This has been facilitated through the implementation of a new assurance mapping process which was developed during the year and included a detailed review of all of our internal controls. As part of this process, controls will be reviewed monthly alongside our key corporate risks. 

Our internal controls also undergo formal review by both Internal and External Audit, whose reports are made available to the Audit and Risk Committee. Having assessed our corporate governance arrangements, I confirm that they comply with generally accepted best practice principles and relevant guidance.

Risk management 

I have assessed our risk management arrangements and confirm that they are in accordance with the guidance set out in the Scottish Public Finance Manual. The year-end Certificates of Assurance include a dedicated section assessing the effectiveness of Revenue Scotland’s risk management approach over the year and no significant control matters were raised. This, alongside the assessment of risk throughout the year, contributes to my overall confidence assessment offered; further confirming that robust arrangements and practices were in operation throughout 2022-23. I was also delighted to receive a ‘substantial’ assurance rating from our internal auditors for the third consecutive year in respect of our risk, control and governance procedures, confirming my assessment.

Elaine Lorimer – Chief Executive and Accountable Officer of Revenue Scotland