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Wales Act 2014

The Wales Act 2014 (WA 2014) provided for the first time, that power to make primary legislation imposing taxes was to be devolved to Wales. The Act also extended the borrowing powers of the Welsh Government. Both of these developments implemented recommendations from the Part I Report of the Commission on Devolution in Wales (the Silk Commission). The WA 2014 includes a few other miscellaneous provisions, which are also outlined below.

New devolved taxes

The WA 2014 enabled the National Assembly to legislate about devolved taxes. The provisions in respect of tax have been incorporated into Part 4A of the Government of Wales Act 2006 (GOWA 2006). Initially legislation was proposed to establish a system for the collection and administration of Welsh devolved taxes and for the creation of two devolved taxes. These were a Welsh tax on transactions involving interests in land (replacing stamp duty land tax in Wales) and a Welsh tax on disposals of landfill (replacing landfill tax in Wales), both of which took effect from 1st April 2018. The primary legislation on taxation passed to date is as follows:

  • The Tax Collection and Management (Wales) Act 2016

The Tax Collection and Management (Wales) Act 2016 established the Welsh Revenue Authority (WRA). The WRA is responsible for the collection and management of devolved Taxes. The Act has put in place the legal framework necessary for the future collection and management of devolved taxes in Wales. It confers appropriate powers and duties on the WRA, so as to enable the WRA to identify and collect the appropriate amount of devolved taxes due from taxpayers. 

  •  The Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017.
From 1 April 2018, Land Transaction Tax applies to land transactions in Wales. Land transactions in Wales will no longer be subject to Stamp Duty Land Tax (SDLT) but will be subject to Land Transaction Tax as set by the National Assembly. This devolved tax, is essentially, a transaction tax applying to the acquisition of interests in land in Wales.   The tax is operated by the Welsh Revenue Authority (WRA). 

  • Landfill Disposals Tax (Wales) Act 2017
From 1 April 2018, a Welsh tax on disposal of landfill came into force. The Landfill Disposals Tax (Wales) Act 2017 established a new tax on landfill disposals. The tax is to be charged on taxable disposals, which are defined in Chapter 2 of Part 2 of the 2017 Act. This Act also makes provisions for disposals that are exempted from the tax. The WRA is responsible for the collection and management of the tax.  

Ability to set Welsh rates of income tax 

The Wales Act 2014 (WA 2014) also empowered the National Assembly to set Welsh rates of income tax for Welsh tax payers. This power does not involve creating a new Welsh income tax, rather it involves changing the rates at which Welsh tax payers pay UK income tax. When the WA 2014 was introduced, the setting of Welsh rates income tax was subject to there being a "yes" vote in a referendum.  The need for a referendum was removed by the Wales Act 2017 (WA 2017) and from 6th April 2019 Welsh Income Tax rates, as set by the Welsh Government, apply to Welsh Taxpayers.   

Detailed rules have been added by section 116E of GOWA 2006 for the purpose of determining whether a person is a ‘Welsh taxpayer’ who should pay any Welsh rates of income tax.

Borrowing powers of Welsh Ministers

There are also provisions in the Wales Act 2014 (WA 2014) which, extended the Welsh Ministers’ borrowing powers. Firstly, there was a new power to borrow funds to meet current expenditure, where this is required because of a shortfall in receipts from devolved taxes or the Welsh rate of income tax compared to forecast receipts. 

Secondly, there was a power to borrow to fund capital expenditure, but only with the consent of the Treasury. The WA 2017 increased the maximum sum that can be borrowed from £500 million to £1 billion.

Miscellaneous provisions

The Wales Act 2014 (WA 2014) makes the following provisions:

  • It increases the length of the term of the National Assembly (i.e. the length of time between general elections of the Assembly Members) from four years to five.
  • It removes the restriction on a person standing as both an Assembly constituency member and an Assembly regional member.
  • It prevents a person being both a Member of Parliament and an Assembly Member.
  • It renamed the Welsh Assembly Government as simply the ‘Welsh Government’.
  • It addedd a provision into the Local Government and Housing Act 1989 to allow the Treasury to place limits on the aggregate amount of housing debt which can be incurred by those local housing authorities in Wales that keep a Housing Revenue Account.
  • It specifically provides that it is a function of the Law Commission to provide advice and assistance to the Welsh Ministers.  There is also a new obligation on the Welsh Ministers to report on how Law Commission recommendations have been implemented in Wales.  More information on the work of the Law Commission in relation to Wales can be found here.

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