Official Statistics

Scottish VAT assignment 2022 - Official Statistics in Development

Updated 14 November 2024

The latest release was published 09:30 14 November 2024. The next release will be published at a date to be confirmed.

1. About this release

This publication on Value Added Tax (VAT) Assignment (VA) for Scotland is produced by HM Revenue and Customs (HMRC) with support from the Scottish Government. The statistics are official statistics in development. They present an estimate of the first ten percentage points (10p) of the standard rate of VAT raised in Scotland and the first 2.5 percentage points (2.5p) of reduced rated VAT raised in Scotland as an annual proportion of UK VAT receipts. This measure was recommended by The Smith Commission

The VA share calculation is based on a detailed model jointly developed by the UK and Scottish governments which considers how much VAT would be assigned to Scotland if it were a separate jurisdiction for VAT purposes considering expenditure in Scotland and the rest of the United Kingdom (rUK). VA estimates for 2011 to 2021 were published on 28 September 2023.

This publication contains a first estimate for the Scottish VA share of UK VAT for 2022, which is the ratio of the VAT that would be assigned to Scotland compared with the VAT raised in the UK. It also presents a revised back series to 2011. Scottish VA share estimates remain provisional to allow for revisions to the underlying data and methodology which are both subject to change.

2. Executive summary

In 2022, the Scottish VA share outturn as a percentage of UK VAT liabilities was 4.42%, up from 4.25% in 2021. For information on VAT liabilities and how this outturn is calculated, see Scottish VAT assignment 2022 - supplementary information.)

Figure 1: Scottish VA share of UK VAT receipts (%), 2011 to 2022

Figure 1 shows the Scottish VA share for calendar years 2011 to 2022.

The Scottish VA share has fluctuated between 4.00% and 4.56% during the period 2011 to 2022. The VA share was lowest in 2020 at 4.00% due to COVID-19 effects, in particular lower domestic tourism expenditure in Scotland compared with domestic tourism in the rest of the UK (rUK). The VA share has recovered in 2021 to 4.25% and 4.42% in 2022; this increase has been driven mostly by recoveries in domestic tourism expenditure in Scotland, closely followed by growth in household expenditure.

Across the rest of the time series, fluctuations in VA share are mostly driven by changes in household expenditure, which is the largest expenditure sector of the model.

3. Model results and commentary

Table 1 shows the Scottish VA share figures for Figure 1, VAT liabilities for the UK and estimated illustrative Scottish VA figures based on the VA share and VAT liabilities.

The estimated Scottish VA share of UK VAT ranges from 4.23% to 4.56% from 2011 to 2022, except for 2020 where VA share fell to 4.00% due to COVID-19 impacts. The cash value of this share is presented in Table 1 as illustrative VA figures.

Table 1: Estimated Scottish VA share of UK VAT compared to UK VAT liabilities, 2011 to 2022

Calendar year	VA share (percentage)	VAT liabilities (£ million)	Illustrative VA share (£ million)
2011	4.54	98,292	4,458
2012	4.55	100,572	4,576
2013	4.56	104,718	4,774
2014	4.41	111,363	4,911
2015	4.36	114,941	5,013
2016	4.23	119,799	5,073
2017	4.56	126,423	5,761
2018	4.43	132,540	5,878
2019	4.34	134,862	5,853
2020	4.00	118,968	4,762
2021	4.25	135,251	5,754
2022	4.42	159,747	7,053

Figure 2: Breakdown of the year-on-year change in Scottish VA share of UK VA by Scottish VA model components 2012 to 2022

Figure 2 shows how the change in the VA share over time is driven by changes in each of the expenditure components (note that the vertical axis only ranges over 1 percentage point):

• between 2013 to 2019 the VA share changes broadly in line with the year-on-year changes to the household sector (the largest sector covering 86% of activity) with the exception of 2015 where there is less than 0.01% contribution to growth in VA share

• from 2020, domestic tourism becomes a key driver in VA share changes, reducing VA share by 0.30 percentage points in 2020, then increasing it by 0.08 percentage points during 2021 with the easing of COVID-19 restrictions and recovering further in 2022 by 0.12 percentage points

• in addition, the household sector continues to be a key driver of the change in VA share in 2022

Underlying data for Figure 2 can be found in Table 4 of the accompanying Excel data.

Growth in the illustrative £ million VA figures

Figure 3 presents the relationship between growth in the cash estimates for the VA share, growth in overall UK VAT liabilities, and changes in the VA share estimated by the model.

In most years growth in UK VAT liabilities is the most important driver. For the second consecutive year both the VA share and VAT liabilities have increased - this is the first time this has occurred since 2013, with this year’s growth representing the largest single year growth, surpassing last year’s total. This is mainly driven by the growth in UK VAT liabilities.

Overall, UK VAT liabilities in 2022 increased by 18% compared to 2021, which itself increased by 14% compared to 2020. The increase can be attributed to the UK’s recovery from the economic effects of the COVID-19 pandemic and high levels of inflation during 2022.

Underlying data for Figure 3 can be found in Table 5 of the accompanying Excel data.

Figure 3: Percentage growth in the illustrative VA cash share

4. Revisions from previous estimates

The Scottish VA share has been revised in all years as underlying National Accounts aggregates are revised. The 2021 publication showed significant revisions compared to the 2020 publication, primarily due to methodological changes. In contrast, revisions this year are relatively smaller.

Table 2 displays these revisions to the VA share and highlights that from 2011 to 2021 the revisions were between -0.14 and 0.01 percentage points, compared to 0.22 and 0.36 percentage points for the same period in the 2021 publication.

Table 2: Revisions to VA share (percentage point) and illustrative VA figures (£ million)

Calendar year	Revisions to VAT assignment share (percentage point change)	Illustrative VAT assignment figures (£ millions)
2011	-0.03	-29
2012	-0.01	-10
2013	0.00	0
2014	0.00	0
2015	-0.01	-11
2016	-0.01	-12
2017	0.01	13
2018	-0.01	-13
2019	0.00	0
2020	-0.03	-36
2021	-0.14	-189

5. What components of the model are driving movements in the Scottish VA share over time?

Figure 4 shows how the change in the household sector of the VA model over time is driven by changes in the Living Costs and Food (LCF) Survey:

• the Scottish share of expenditure based on the LCF changes broadly in line with the year-on-year changes to the household sector (the largest sector covering 86% of activity, which the LCF feeds into)

• in 2021, the Scottish share of the household sector rose by 0.45 percentage points and was driven by an increase in domestic tourism and household expenditure in Scotland, relative to rUK

• in 2022, the Scottish share of the household sector fell by 0.24 percentage points relative to rUK

Underlying data for Figure 4 can be found in Table 6 of the accompanying Excel data.

Figure 4: Scottish share of UK household expenditure: LCF Survey versus VA model

Living Cost and Food Survey and Standard Rate Equivalent (SRE) expenditure

Given the importance of the household sector due to its large share of total result, Figure 4 presents the Scottish share of total UK household expenditure per the LCF Survey compared to the Scottish SRE share of UK SRE household expenditure derived using the VA model. SRE is a way of reweighting expenditure shares to take account of differing VAT rates. There is more explanation of SRE in the supplementary information.

The VA model focuses on categories of expenditure which are subject to VAT and translates these into SRE currency, while the LCF Survey data provides the raw data before any of these adjustments.

The LCF is one of many data sources the VA model used to calculate the Scottish SRE share of UK household expenditure.

Figure 4 shows that the Scottish SRE share of UK SRE household expenditure from the VA model has previously followed a similar trend as the Scottish share of total UK expenditure based on the LCF, notably the decrease in 2016 and increase in 2017.

The changes in the Scottish share of UK total expenditure depicted by the LCF indicate that the underlying LCF data is largely driving the changes in the Scottish household share in the VA model, which subsequently is driving the VA share for non-COVID-19 years (2011 to 2019).

6. Breaking down expenditure components in the Scottish VA Model

Figure 5 displays the breakdown in expenditure components of total SRE expenditure in Scotland over the time series, before adjustments, and demonstrates the following trends:

• the time series shows limited variability in the components of SRE expenditure in Scotland from 2011 to 2022

• the household sector has stayed relatively stable, between 83% and 87%

• the central government sector has grown to 7.5% in 2022, up from 7.1% and 6.8% in 2020 and 2021 respectively. This is an increase on 2011 to 2019 levels which ranged from 4.4% to 5.4%

• the exempt sector has fallen to a 3.0% share in 2022

• the housing sector has remained between 3.9% and 5.1% from 2011 to 2022

• the charities sectors have remained less than 0.1% from 2011 to 2022

Underlying data for Figure 5 can be found in Table 7 of the accompanying Excel data.

Figure 5: Breakdown of total SRE expenditure in Scotland by sector, 2011 to 2022

7. Household SRE expenditure

Table 3 demonstrates the following household expenditure patterns for Scotland and rUK:

• expenditure in Scotland and rUK show similar patterns for the different household expenditure categories

• the three categories showing the largest share of expenditure for both regions are transport (18.64%), recreation and culture (14.63%), and restaurants and hotels (17.85%)

• the two categories with the smallest share of expenditure for both regions are health (1.23%) and education (≈ 0%)

• the largest difference in expenditure patterns between regions is for tobacco, where expenditure takes up a noticeably larger proportion of total household expenditure for Scotland (8.63%) when compared to rUK (6.69%). This is in keeping with ONS statistics on tobacco consumption, suggesting that Scotland consumes a higher proportion of tobacco products relative to England

Table 3: Breakdown of household SRE expenditure in Scotland and in the rest of the UK, 2022

Sector	% of SRE expenditure in Scotland	% of SRE expenditure in the rest of UK	Percentage point difference
Food & Non-Alcoholic Beverages	3.76	3.22	0.54
Alcoholic Beverages, Tobacco and Narcotics	7.75	5.67	2.08
Clothing and Footwear	7.47	8.20	-0.73
Housing, Water, Electricity, Gas, and other Fuel	5.92	5.18	0.74
Household Goods and Services	10.11	9.82	0.29
Health	1.23	1.45	-0.21
Transport	18.64	18.82	-0.18
Communication	3.80	3.49	0.30
Recreation and Culture	14.63	16.08	-1.46
Education	0.00	0.22	-0.22
Restaurants and Hotels	17.85	19.39	-1.54
Miscellaneous Goods and Services	8.84	8.46	0.38

8. Caveats

1. It is not possible to directly measure VAT raised in Scotland as the information collected from businesses through VAT returns does not specify the UK region of consumption. The share has been estimated using the Scottish VA model, jointly developed by officials from UK government and Scottish government.

2. The information in this publication is calculated on a calendar year basis and presents VAT data according to when the VAT receipts arose (referred to as VAT liabilities in this publication) rather than when VAT would have been paid. VAT receipts are reported in financial year. As there is normally a lag of around three months between VAT liability and VAT payment, the VAT liabilities used in this publication presented on a calendar year basis are assumed to be the same as VAT receipts by financial year.

3. The data sources used in the VA model include a variety of survey data affected by COVID-19 with the introduction of stay-at-home measures in March 2020 affecting data collection and other elements. For survey sources where data is available, expenditure may also reflect behavioral changes linked to COVID-19. For more information on the data sources affected, see ‘methodology’ in the ‘Background and methodology’ report.

9. Contacts and feedback

Produced by the Scottish VAT assignment team, as part of the ‘Devolved Taxes’ collection.

We welcome queries and user feedback on this publication.

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modelscottishvatassignment@hmrc.gov.uk

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