The UK government on January 8 published a bill that would give Northern Ireland the power to set its own corporation tax rate beginning April 2017.
If the bill is passed, it is expected that Northern Ireland will lower its corporate tax rate to compete with the Republic of Ireland, which sets its rate at 12.5 percent. The corporate tax rate in Northern Ireland is currently 21 percent.
The draft legislation provides that the UK Parliament will retain power over the corporation tax base, including reliefs and allowances. Special rules are provided which describe the way in which various credits and reliefs would operate, such as the patent box and film tax relief.
The power to set corporate rates will not extend to non-trading profits, such as income from property. Also, the following trades and activities would remain within the UK regime: lending and investment (including those of treasury companies); asset management; finance leasing; long-term insurance (including life insurance), and reinsurance activities of both general and life insurance. The UK’s oil and gas tax regime will also not be part of the Northern Ireland regime.
Northern Ireland Secretary of State Theresa Villiers said there strong support for the change across all five of the parties in the Northern Ireland Executive. The business community also supports the bill, said Villiers. She said that there is widespread belief that passage of the bill and rate reductions would provide a major incentive for domestic businesses to invest further in Northern Ireland and significantly increase foreign direct investment.
“Given the land border shared with a lower corporation tax jurisdiction, this measure has the potential to create thousands of new jobs and stimulate crucial growth in Northern Ireland’s private sector, leading to a stronger, re-balanced economy,” Villiers said.
The UK government intends that the bill to reach its final stages in March and achieve Royal Assent before the UK general election in May.
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