Glossary of Terms

We do our best to use plain English throughout our website and publications, but sometimes we have to use more technical terms. We explain these terms in this glossary, and provide a list of the abbreviations we use below. 

If you feel there are any terms missing from the glossary, please do not hesitate to contact us.

Glossary of Terms

A B C D E F  G I L  M N O P R S T U V W Z Abbreviations 

Accounting basis: also called basis of accounting; it is the time when a financial transaction is recorded. Cash basis and the accrual basis are the two primary methods of recording transactions in accounting.

Accrual basis: a method of recording revenues as occurring when the liability arises. The tax receipt is recorded when, for example, a transaction took place or income was earned, rather than when the cash was paid. It is possible that the two events coincide.

Assessor: An independent public official who determines the rateable value of all properties entered on the valuation roll, along with other functions. Assessors work under an umbrella body called the Scottish Assessors Association.

Assigned taxes: are taxes with revenue allocated into the Scottish budget, while control over changing the tax is not devolved to the Scottish Government.

Behavioural effects: refers to how taxpayers respond to a change in tax policy, whether a change in tax rates, tax bands, tax compliance activity or some other similar event.

Behavioural elasticity: an estimate of the scale of the change in taxpayer behaviour in response to a change in the tax rate. For example, the number of housing transactions that are lost as a result of a unit increase in the rate of property transactions tax, or the amount of income tax foregone as a result of a unit increase in the rate of income tax (see also Taxable Income Elasticity).

Buoyancy: captures all changes in the tax base for non-domestic rates, excluding revaluation appeals. Buoyancy is measured as the annual growth in rateable value corrected for any losses as a result of revaluation appeals. It reflects both the physical growth in the tax base and also administrative effects present in the data such as the resolution of running roll appeals.

Calendar year basis: Referring to a full year period running from January 1 to December 31.

Capital spending: refers to spending in assets that have a durable life of over a year. Examples of capital spending include investing in schools, roads or hospitals.

Caseload: the number of individuals in receipt of, or expected to receive, payments for a given social security benefit.

Cash basis: is a method of recording revenues as occurring when the cash is paid. The tax receipt is recorded when the tax is paid, not when the transaction occurred.

Deflator: is a measure of the average level of prices. For example, the household consumption deflator measures the average level of prices that households face when making their purchases, the investment deflator is the average level of prices of capital goods and so on. The average is calculated form a representative “shopping basket” of goods and/or services. The basket can change from year to year with people's consumption and investment patterns.

Devolved social security: financial or other assistance to or in respect of an individual where there is an entitlement to a devolved social security benefit. This includes the benefits devolved under the Scotland Act 2016, the Scottish Welfare Fund and Employability Services.

Devolved taxes: are taxes whose administrations have been transferred to a devolved administration such as the Scottish Parliament. Scotland Act 2012 gave Scottish Ministers new powers to administer some taxes such as the Land and Buildings Transaction Tax (LBTT) and the Scottish Landfill Tax.

Disposable income: refers to the total personal income once direct personal taxes are subtracted.

Distribution: is a listing or function showing how often all the possible values (or intervals) of the data occur.

Drawdowns: are declines in the amount of money in reserve for the Scottish Government to allocate in their budgets.

Economic inactivity: those individuals who are neither in employment or unemployment. Includes individuals who are studying, sick, looking after family or home, and retired.

Effective tax rate: is the average rate at which a transaction, individual or corporation is taxed. Effective tax rates are especially relevant when working with progressive taxes, as different level of expenditure, income or benefit will be taxed at different rates.

Employment: an individual is in employment if they have a job, including those in self-employment. The employment level counts the number of individuals in employment. Individuals with multiple jobs are still only counted as in employment once.

Equilibrium: Used in our forecasting process to describe a state where variables have returned to long-run trend values and the output gap has closed. We do not strictly define a state of general equilibrium in the economy.

Exempt businesses: are businesses who supply VAT exempt goods and services. They do not charge VAT on these supplies but they are liable for the VAT incurred on their purchases relating to these supply.

Exempt goods or services: are those goods that are not liable for VAT. Businesses that supply exempt goods and services do not charge VAT on them and cannot claim back the VAT paid on related purchases. Exempt supplies include insurance; finance; some supplies from doctors and dentists; and some types of education and training.

Financial year basis: In our forecasts and documents this is the 12 month period running from April in one year to March in the next. Other companies, institutions and individuals may use different definitions of a financial year.

Fiscal drag: Many taxes are progressive, with higher tax rates being applied as you move up through the tax base, for example on higher incomes or larger transactions above certain thresholds. Fiscal drag refers to the general increase in revenues over time that comes from the tax base growing relative to tax thresholds and higher tax rates being applied.

Forecast: a considered prediction of an expected outcome. May be based on quantitative modelling and analysis, broader market intelligence and judgement.

Forecast error: refers to the difference between a forecast and the actual value, for example, the difference between the tax revenues forecast to be raised and the tax revenues actually raised.

Forecast horizon: the period of time over which a forecast is created. The Commission produces forecasts for the next five financial years.

Forecast sensitivity analysis: refers to the analysis of changes in forecasting assumptions to understand the effect of a set of independent variables on some dependent variable under certain specific conditions. This differs from scenario analysis, which is used to understand the full range of outcomes in the context of decision-making.

Forestalling: The activity of ‘shifting’ income between tax years as part of a response to a change of tax policy. This usually has the purpose of avoiding paying a higher rate of tax, or to benefit from a lower rate of tax.

Government services liable for VAT: concern a limited number of government activities where central government bodies are unable to recover VAT paid. These include some public administration and defence services; compulsory social security services; education; human health activities; residential care activities; and social work services without accommodation.

Gross Domestic Product: refers to the total monetary value of all final goods and services produced within the territory of a country over a particular period of time.

Growth: Generally expressed as a percentage rate, the change in the value of a variable over time. If a variable declines in value over time, this may be referred to as negative growth.

Inflation: is an increase in the general price level of goods and services. When there is inflation in an economy, the value of money decreases because a given amount will buy fewer goods and services than before.

In-year forecast: is a forecast for the current year. An in-year forecast may use data available for the current year. It is commonly used a baseline for subsequent forecasts.

Labour force: the sum of employment and unemployment. Describes the total potential supply of labour at the time. Also known as economic activity or participation.

Labour force participation: refers to the number of people who are either employed or are actively looking for work. This is often referred as economic activity.

Long-term: A period where variables have returned to their trends or equilibrium has been achieved. In some cases, the long-term trend levels of a variable may not be achieved within our forecast horizon.

Macroeconomic forecast: a general term referring to forecasts of a range of aggregate economic variables, for example GDP, inflation or employment.

Marginal tax rate: The rate of tax paid on each additional pound earned by a taxpayer.

Net present value: measures the value added by a project from comparing the difference between the present value of cash inflows and the present value of cash outflows over a period of time. This is used in the context of assessing the profitability of a project.

Nominal value: refers to economic variables that are measured in current prices, not adjusted to control for inflation. This is often referred to as the cash value, and reflects the actually amount of money paid for a good or service.

Non-domestic property: are properties such as shops, offices, warehouses and factories and any other property not classed as a domestic property. For the purposes of non-domestic rates, the Assessors determine the classification of properties as domestic and non-domestic.

Non-profit institutions serving households (NPISH): are non-profit institutions which are not mainly financed and controlled by government and which provide goods or services to households for free or at prices that are not economically significant. Examples include churches and religious societies, sports and other clubs, trade unions and political parties.

Non-residential (commercial): is any property that is not residential property. (See also Residential Property).

Non-savings non-dividend income tax receipts: are tax receipts proceeding from employment income, profits from self-employment, pension income and rental profits.

Onshore GDP: A shorthand for referring to Scotland’s GDP excluding the value of oil, gas and other hydrocarbons produced in the Scottish sector of the UK continental shelf as defined in the Scottish Fiscal Commission Act 2016. This is the same basis as the headline GDP figures published by the Scottish Government.

Output gap: The difference between measured GDP and our estimates of potential output.

Outturn data: from a forecasting perspective, is the amount of taxes collected, or the amount of expenditure incurred in a given period rather than what was expected or forecast.

Per capita variable: refers to a variable that is measured per head. This is calculated by dividing the aggregate value of a variable in an area at a specific time, by the total population in that area at that specific time.

Personal Allowance: The level of income that can be earned by a taxpayer that is not subject to tax.

Policy costing: an estimate of the revenue raised or forgone as a result of a change in tax policy, or the change in social security spending as a result of a change in social security policy.

Potential Output: The maximum amount of goods and services the economy can sustainably produce without creating excessive price pressures.

Poundage: can be thought of as the rate of tax that is applied to the rateable value of non-domestic property to calculate non-domestic rates liability, before any adjustments for reliefs or the Large Business Supplement are made. In England and Wales the poundage is usually called the multiplier.

Productivity: an amount of output for a given amount of input. In the economic forecasts productivity is defined as GDP (output) divided by total hours worked (input).

Progressive tax: a tax in which the tax rate increases as the taxable amount increases. For example, a tax system where those with higher income or wealth pay higher effective tax rates or in which property transactions with higher values incur a higher rate of tax.

Projection: a simple estimate of the future value of a variable, often based on simple methods. May be a starting point or part of the process of creating a forecast.

Rateable value: is the legally-defined valuation of a non-domestic property which is determined by independent Scottish Assessors. It can broadly be thought of as being based on the open market rental value of the property.

Ratepayer: Anyone who is liable for rates on a non-domestic property. Ratepayers include businesses, public sector, and the third sector.

Real value: refers to economic variables that are adjusted to control for inflation.

Reduced rated goods or services: are those goods and services which are liable for VAT at the reduced rate of five per cent. This applies to some goods and services such as domestic heating fuel and children's car seats.

Residential property: is a building that is used or suitable for use as a dwelling, or is in the process of being constructed or adapted for use as a dwelling; land that forms part of a garden or grounds of a building suitable for use as a dwelling. This includes any buildings or structures on such land; or an interest in or right over land that subsists for the benefit of any of the above.

Resource spending: refers to spending on the day-to-day running costs of government programmes and administering the department.

Revaluation: the rateable values of non-domestic properties are revalued by Scottish Assessors on a regular basis, with these revaluations typically taking place on a 5-year cycle. The most recent revaluation took effect from April 2017.

Risk: a state where an outcome is unknown, but it is possible to quantify the probabilities of different outcomes based on either historic evidence or logic. For example, a coin toss.

Running roll appeals: are lodged by the owner/occupier of non-domestic property when they believe there is justification to have their rateable value changed on the grounds of either error, new interest, or as a result of a material change of circumstances.

Short-term: Rather than a fixed period of time, the short-term is where there continues to be a state of disequilibrium or variables are away from their trends. In the context of the Commissions forecasts, the short-term usually refers to approximately the first year of the forecasts.

Slab system: is a tax regime where a single tax rate is paid on the entire taxable amount. For example, the Additional Dwelling Supplement is charged at 3% of the total value of the property.

Slice system: is a tax regime where successive sections of the taxable amount are taxed at increasing rates. For example, income tax or LBTT.

Standard rated equivalent (SRE) expenditure: is the equivalent amount of expenditure that would be liable for VAT at the standard rate of 20 per cent, inclusive of the amount of VAT. For example, if we have £300 of expenditure before VAT, with £100 at standard rate (20 per cent), £100 at reduced rate (five per cent) and £100 at zero rate. The VAT inclusive amounts are £120, £105 and £100, respectively, with a total of £25 being VAT. The equivalent amount of expenditure at the standard rate that would be required to raise £25 VAT is £125. Hence, the standard rated equivalent expenditure (inclusive of VAT) is £125 + £25 = £150.

Standard rated goods or services: are those goods and services which are liable for VAT at the standard rate of 20 per cent. This applies to the sale of most goods and services in the UK.

Standard rated share (SRS): is equal to standard rated equivalent expenditure as a proportion of total expenditure. (See also standard rated equivalent expenditure.)

State aid: State aid refers to forms of assistance, including financial assistance from a public body, or publicly-funded body, which has the potential to distort competition and affect trade between member states of the European Union. To meet EU requirements assistance given under several tax reliefs are capped at State aid de minimis (meaning a maximum of €200,000 can be awarded over a rolling 3 year period).

Take-up rate: refers to the proportion of the eligible population who receive or claim a benefit or tax relief.

Tax bracket: is also known as tax band, and refers to the successive sections in which a tax regime is divided in.

Tax motivated incorporations (TMI): Individuals who work for themselves may be self-employed or have the option to ‘incorporate’ and manage their business as directors of a limited company. For individuals who choose to incorporate, this changes their tax liabilities from NSND income tax to corporation tax and dividends, which may offer a tax advantages. TMI refers to individuals who could have been an employee or self-employed, but incorporate specifically for tax purposes.

Tax rate: is the percentage or ratio at which an individual or business is taxed.

Taxable income elasticity (TIE): refers to the proportional change in taxable income resulting from a proportional change in the ‘net of tax’ income.

Tone date: the assessment of all rateable value carried out by Scottish Assessors is undertaken with reference to a single date to ensure fairness. For the 2017 revaluation this date was 1 April 2015.

Uncertainty: a state where an outcome is unknown and, unlike risk, it is not possible to formally quantify the probabilities of different outcomes.

Underspends: are where the amount spent is below the amount allocated in that year. The Scottish Government is permitted to save underspends (up to a limit) in the Scotland Reserve for spending in future years.

Unemployment: The official definition of unemployment, which is used in unemployment statistics, is those individuals who are not currently in employment but are actively looking for work and are available to start work in the next two weeks.

Valuation roll: is a public document maintained by the Scottish Assessors containing details on the rateable value of all non-domestic property in Scotland except for properties exempt from paying non-domestic rates.

Value Added: refers to the amount by which the value of a commodity is increased at each stage of its production, exclusive of costs at a specific stage.

Variable: a set of observations of economic or fiscal factors that may vary in value, for example GDP or tax revenues. Generally used to refer to a set of values being used in a model or forecast, for example, employment is used as a variable in the economic forecasts.

VAT base: is the total amount of expenditure that is liable for VAT.

VAT gap:is the difference between the expected VAT revenues based on VAT total theoretical liability and the VAT actually collected by HMRC. (See also VAT total theoretical liability.)

VAT total theoretical liability (VTTL): is the theoretical amount of VAT that would be collected from the tax base if there was no fraud, avoidance, or losses due to error or non-compliance. It is calculated by applying the relevant VAT rates to detailed breakdowns of expenditure liable for VAT.

Wage stickiness: refers to the resistance of wages to adjust in response to changes in the economy. For example, it may take time for an increase in inflation that increases prices across the economy to be reflected in wages, and wages may not ever fully adjust to the change in inflation.

Zero rated goods or services: are those goods and services which are liable for VAT but the VAT rate is zero per cent. Zero rated items include most food. Businesses that sell zero rated goods and services can generally reclaim VAT on purchases that relate to those sales. This is in contrast to exempt goods and services, where VAT cannot normally be reclaimed on the related purchases. (See also exempt goods or services.)

 

Abbreviations

Acronym Meaning
AA Attendance Allowance
ADS Additional Dwelling Supplement 
ADT Air Departure Tax
AETR Average Effective Tax Rate
APD Air Passenger Duty
ASHE Annual Survey of Hours and Earnings
BGA Block Grant Adjustment
BMW Biodegradable Municipal Waste
BSF Best Start Foods
BSG Best Start Grant
CA Carer's Allowance
CAA Civil Aviation Authority
CAS Carer's Allowance Supplement
CBI Confederation of British Industry
COE Compensation of Employees
CPI Consumer Price Index
DHP Discretionary Housing Payment
DLA Disability Living Allowance
DWP Department for Work and Pensions
ESA Employment and Support Allowance
EU European Union
EWC European Waste Catalogue
FEA Funeral Expense Assistance
FER Forecast Evaluation Report
FP F Funeral Payments
FRS Family Resource Survey
FSS  Fair Start Scotland
FTB First Time Buyers
GB G Great Britain
GCF Gross Capital Formation
GDP  Gross Domestic Product 
GERS Government Expenditure & Revenue Scotland
HMRC Her Majesty's Revenue and Customs
HS  Healthy Start Vouchers
ICE Intercontinental Exchange
IPS International Passenger Survey
IT  Information Technology
JSA Jobseekers' Allowance
LBTT Land and Buildings Transaction Tax
LCF Living Costs and Food survey
LFS Labour Force Survey
MCC Material Change of Circumstances
METR Marginal Effective Tax Rate
MOG Machinery of Government
NDR Non-Domestic Rates
NDRi Non-Domestic Rates Income
NHS National Health Service
NICs s National Insurance Contributions
NLF  National Loans Fund
NPD Non-Profit Distributing
NPIS Non-Profit Institutions Serving Households
NRS National Records of Scotland
NSND Non-Savings and Non-Dividends
OBR Office for Budget Responsibility
OECD Organisation for Economic Co-operation and Development
OGA Oil and Gas Authority
ONS Office for National Statistics
PAYE Pay As You Earn
PD Political Declaration
PFI Private Finance Initiative
PIP Personal Independence Payment
PMI Purchasing Managers' Index
PSM Policy Simulation Model
PT Primary Threshold
PUT Public Use Tape
QNAS Quarterly National Accounts Scotland
RHDI Real Household Disposable Income
RPI Retail Price Index
RTI Real Time Information
rUK Rest of UK excluding Scotland
RV Rateable Value
SAA Scottish Assessors Association
SDLT Stamp Duty Land Tax
SEFF Scotland's Economic and Fiscal Forecasts
SEPA Scottish Environmental Protection Agency
SFC Scottish Fiscal Commission
SG  Scottish Government
SLfT Scottish Landfill Tax
SLCF Scottish Landfill Communities Fund
SPI Survey of Personal Incomes
SSMG Sure Start Maternity Grant
SWF Scottish Welfare Fund
TIE Taxable Income Elasticity
UEL  Upper Earnings Limit
UK United Kingdom
UKCS UK Continental Shelf
UKF UK Finance
USS Understanding Society Survey
VAT Value Added Tax
VR Valuation Roll
VTTL VAT Total Theoretical Liability
WA Withdrawal Agreement
WAS Work Able Scotland
WFS Work First Scotland
YCG Young Carer's Grant