Scottish income tax report covers key audit risks

The National Audit Office (NAO) has published a report today on HMRC’s administration of Scottish income tax, including the final calculation of Scottish revenues for the 2022/23 tax year.

The Auditor General for Scotland, Stephen Boyle, provides additional assurance to the Scottish Parliament on the work of the NAO in this area.

In his accompanying report, he says the NAO’s approach was reasonable and covered the key audit risks. He also draws attention to the main findings in the NAO report, and highlights:

• The Scottish income tax outturn for 2022/23 is £15.169 billion  
• HMRC’s provisional estimate of Scottish income tax for 2023/24 is £17.254 billion  
• The net reconciliation of 2022/23 income tax will increase the 2025/26 Scottish budget by £449 million – the largest adjustment to the budget resulting from the reconciliation to date.

Reconciliations correct for the difference between forecasted tax receipts used in the Scottish budget and the actual outturn which is known later.  

Both the NAO and Auditor General reports will be presented to the Scottish Parliament’s Public Audit Committee.

Stephen Boyle, Auditor General for Scotland, said:

I am pleased that the NAO has been able to report that HMRC has implemented adequate processes and that the outturn of income tax for 2022/23 is fairly stated.

However, it’s important that the Scottish Government and HMRC keep working together to draw out the extent of any relationship between tax policy changes and taxpayer behavioural responses.

Ministers need this data to inform future tax policy decisions and enable more informed scrutiny.

Understanding the current economic performance gap between Scotland and the rest of the UK should also be a key area of focus for the Scottish Government in the coming years.