Richard Leeson, chief executive at Adviser Advocate, and former sales and marketing director at Axa Wealth International, said the taxation protocol on Scottish onshore bonds in the event of the country’s independence is “uncertain”, as the country is not prepared for the ramifications.
“There will be a period where Scottish onshore bonds continue to adopt UK legislation, but when they try to change the way in which tax is calculated, it could really create problems,” he said. “If Scotland’s oil revenues aren’t as generous as predicted, it will put the country’s finances into a shortfall, and the taxation of investments will likely become a viable option.”
He added that the changes could create a tax situation similar to that of US expatriates residing in the UK, who have to pay both UK and US taxes: “There would be a shortfall if UK insurers continue to collect tax on Scottish products.
“However, Scotland could potentially charge a source tax, regardless of an investor’s UK contributions, meaning investors could end up paying tax twice.”
He said it was likely that companies would move across the border into England, in order to be part of its market, due to the confusion arising from Scotland’s independence.
“The countries will need to reach a treaty to sort this out, but this could take years and leave the problems standing in the meantime.”
He said he could picture a situation where many Scottish investors move their money into offshore bonds in order to avoid the potential confusion, before moving it back several years later once things have “settled down”.
'Potential problems'
“The potential problems run all the way from taxation into the regulation of Scottish advisers,” he said. “The problem with Scotland is that so many of its investors are tied up into investments in the UK, and this cannot be reversed instantly.”
In response to the referendum, Scotland-based Standard Life said earlier this year that it would “take whatever action [it] considers necessary, including transferring parts of [its] operations from Scotland” in order to ensure continuity and protect the interests of its stakeholders.
Chief executive David Nish added that the company has started work to establish additional registered companies to operate outside Scotland, into which it could transfer parts of its operations “if it was necessary to do so”.
When asked about post-independence taxation, Scotland-based Prudential said it would remain neutral on the subject and treat its customers the same, regardless of the outcome.
