Corporation Tax In Northern Ireland

The committee supports the principle of devolving to the Northern Ireland Executive the decision over whether or not to amend the rate of corporation tax, and believes this would assist the indigenous private sector to expand, innovate and employ more staff. The report uses 12.5% as a benchmark for the lower rate of corporation tax, but suggests that on the basis that the decision is devolved to the Northern Ireland executive it may, in due course, choose a lower rate. To maximise the benefits of a lower rate, though, continued progress needs to be made on other economic development policy mechanisms, including planning, education, and incentives for research and development and exporting. Low corporation tax is not a panacea for all Northern Ireland's economic ills, warns the committee, and there are considerable implementation issues: direct comparisons with the Republic of Ireland and its experience with 12.5% are difficult because the UK and Irish tax systems are different; and the UK Government would have to satisfy the criteria laid down in the Azores judgment for the tax reduction to satisfy EU rules on state aids. The committee was surprised to discover HM Treasury do not know how much corporation tax is raised in Northern Ireland. It is important that the Northern Ireland Executive has as much information as possible before deciding if, and how, it wishes to lower the rate, and at least a better idea of the amount of financial risk they are taking on. Furthermore, the benefits of lowering corporation tax must not be outweighed by the costs to businesses and HMRC.

This Bill contains taxation provisions under which the Northern Ireland Assembly will have the power to set the main rate of corporation tax in respect of certain trading profits, to be called the Northern Ireland rate. The rate, in general, will apply to all of the trading profits of a company if that company is a micro, small or medium-sized enterprise (SME) and the company's employee time and costs fall largely in Northern Ireland. It will also apply to a corporate partner's share of the profits of a partnership trade if that company and partnership are both SMEs and the partnership's employee time and costs fall largely in Northern Ireland. The rate will also apply to profits of large companies, and (in this case of a corporate partner not covered by the SME rules referred to above) to a corporate partner's share of the profits of a partnership that are attributable to a Northern Ireland trading presence, that presence being termed as a "Northern Ireland regional establishment" (NIRE). The trading profits attributable to the NIRE are computed using internationally recognised principles with some modifications and adaptations.

The committee supports the principle of devolving to the Northern Ireland Executive the decision over whether or not to amend the rate of corporation tax, and believes this would assist the indigenous private sector to expand, innovate and employ more staff. The report uses 12.5% as a benchmark for the lower rate of corporation tax, but suggests that on the basis that the decision is devolved to the Northern Ireland executive it may, in due course, choose a lower rate. To maximise the benefits of a lower rate, though, continued progress needs to be made on other economic development policy mechanisms, including planning, education, and incentives for research and development and exporting. Low corporation tax is not a panacea for all Northern Ireland's economic ills, warns the committee, and there are considerable implementation issues: direct comparisons with the Republic of Ireland and its experience with 12.5% are difficult because the UK and Irish tax systems are different; and the UK Government would have to satisfy the criteria laid down in the Azores judgment for the tax reduction to satisfy EU rules on state aids. The committee was surprised to discover HM Treasury do not know how much corporation tax is raised in Northern Ireland. It is important that the Northern Ireland Executive has as much information as possible before deciding if, and how, it wishes to lower the rate, and at least a better idea of the amount of financial risk they are taking on. Furthermore, the benefits of lowering corporation tax must not be outweighed by the costs to businesses and HMRC.

This Bill contains taxation provisions under which the Northern Ireland Assembly will have the power to set the main rate of corporation tax in respect of certain trading profits, to be called the Northern Ireland rate. The rate, in general, will apply to all of the trading profits of a company if that company is a micro, small or medium-sized enterprise (SME) and the company's employee time and costs fall largely in Northern Ireland. It will also apply to a corporate partner's share of the profits of a partnership trade if that company and partnership are both SMEs and the partnership's employee time and costs fall largely in Northern Ireland. The rate will also apply to profits of large companies, and (in this case of a corporate partner not covered by the SME rules referred to above) to a corporate partner's share of the profits of a partnership that are attributable to a Northern Ireland trading presence, that presence being termed as a "Northern Ireland regional establishment" (NIRE). The trading profits attributable to the NIRE are computed using internationally recognised principles with some modifications and adaptations.

In this report the Committee considers both the Corporation Tax Bill and the Taxation (International and Other Provisions) Bill. They paid particular attention to: the changes proposed by the Corporation Tax Bill expected to increase or reduce the amount of corporation tax payable; and the powers in the Corporation Tax Bill to amend legislation and the assurance given by the Minister that the projects' Consultative and Steering Committees would have to consent to any such changes. The Committee accepts the proposed amendments to both Bills, which are of a minor, technical nature

Royal Assent, 26th March 2015. An Act to make provision for and in connection with the creation of a Northern Ireland rate of corporation tax. Explanatory notes to assist in the understanding of the Act will be available separately

1925- includes measures of the National Assembly of the Church of England which have received royal assent.