The rate of corporation tax (CT) in Northern Ireland is to be cut to 12.5% as planned from the current UK rate of 20%, after the stalemate between the British and Northern Ireland executive over a range of political disagreements has been broken, but the new rate will now be introduced a year later than originally proposed
From April 2018, CT in Northern Ireland will be 12.5%, the same rate as in the Republic of Ireland. Northern Ireland’s major parties have long campaigned for CT to be devolved, maintaining that cutting the tax would encourage business investment and help the economy.
While there was agreement in principle to this, the move fell victim to a prolonged disagreement between the British and Northern Ireland executive at Stormont over several issues, including paramilitarism and welfare reform.
After ten weeks of intensive cross party talks at Stormont House, the Northern Ireland executive and the UK and Irish governments have agreed a set of actions contained in the document ‘A Fresh Start: the Stormont Agreement and Implementation Plan’.
This states that the UK government will further financial support of around £500m to support Stormont in ‘tackling issues unique to Northern Ireland including support for their programme to remove peace walls’. The package also paves the way for completion of the devolution of CT powers.
It also says: ‘ The UK government will undertake an ex-post review of the costs of the devolution of CT four years after the implementation of a devolved rate by the executive. This review will consider the extent of behavioural costs (but not second round effects) and will make further adjustments to the Northern Ireland block grant as supported by new evidence.’
Colin Walsh, chairman, CBI Northern Ireland, said: ‘Reducing CT will undoubtedly provide a key ingredient to energise the private sector as well as attracting a new generation of inward investment businesses thereby creating tens of thousands of new jobs and boost prosperity for all, and transform our economic prospects.’
Alastair Hamilton, chief executive of Invest NI, said: ‘Now that we have an agreed rate and date will be able to proactively begin engaging with potential new investors who may have profit centre opportunities. This announcement will also provide a welcome boost to local, profitable businesses which will have additional finance to invest in their future growth.’
The Stormont Agreement and Implementation Plan is here
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