Projected 12.5% Corporation Tax Rate For Northern Ireland From April 2018

Author:Mr Alan Taylor
Profession:Arthur Cox
 
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BACKGROUND

As part of a package of reforms introduced by the Stormont House Agreement in 2014, the NI Executive agreed that legislative procedures for the devolution to Northern Ireland of control over the corporation tax rate should be implemented as soon as possible. The date committed to in this agreement was April 2017, however the implementation of these arrangements became delayed and further discussions were entered into resulting in the publication of a further reform document known as "The Fresh Start Agreement."

The Corporation Tax (Northern Ireland) Act 2015, (the "NI Act") was introduced in January 2015 and received Royal Assent on 26th March 2015. The NI Act inserts provisions into the Corporation Tax Act 2010 "The 2010 Act" for the Treasury (in connection with the NI Assembly) to implement a tax rate to be charged in Northern Ireland which is separate to the main UK rate known as the "Northern Ireland Rate."

The tax base will not differ from the GB base, i.e. the assessment of taxable profits will continue to be computed using normal UK rates.

Until the right to set the rate of corporation tax is exercised by the NI Executive, the rate charged in Northern Ireland will be the UK main rate.

APPLICABILITY

Chapter 3 of the Northern Ireland Act provides for corporation tax to be charged at a rate set by the Northern Ireland Assembly on profits generated in Northern Ireland as distinct from other mainstream profits.

Qualifying Company Profits - ("SMEs)

Under the Act, the Northern Ireland Rate applies to the qualifying Northern Ireland trading profits of micro, small or medium-sized enterprises ("SMEs") where the company's employee time and costs fall largely within Northern Ireland. The required workforce component will be met where at least 75% of a company's UK staff time and costs relates to work carried out in Northern Ireland.

Large Companies

The "Northern Ireland Rate" will also apply to the profits of large companies or corporate partners which do not meet the test for "SMEs" but have a Northern Ireland Regional Establishment (NIRE) which is defined as a fixed place of business in Northern Ireland. A large company (without a qualifying NIRE) can also qualify if it carries on business in NI through a dependent agent; but not through an independent agent.

EXCLUDED ACTIVITIES

Profits from the following trades which are excluded from the Northern Ireland Rate will be charged at the UK main rate:

oil activities; lending and...

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