Overview

This bill establishes a separate corporation tax rate for Northern Ireland, allowing the Northern Ireland Assembly to set a rate different from the main UK rate. The bill also makes adjustments to other tax laws to ensure consistency and fairness.

Description

The Corporation Tax (Northern Ireland) Bill introduces a new system where the Northern Ireland Assembly, upon recommendation from the Minister of Finance and Personnel and with cross-community support, can set its own corporation tax rate. If the Assembly doesn't set a rate, the main UK rate applies. The bill details how this rate will be applied to different types of businesses and tax reliefs.

Key Aspects:

• Northern Ireland Rate Determination: The Northern Ireland Assembly sets the rate, subject to conditions, otherwise the UK main rate applies.
• Profit Allocation: The bill specifies how a company's profits and losses are allocated between the Northern Ireland rate and the main UK rate, considering factors like location of business activity and type of business.
• SME vs. Large Companies: Different rules apply depending on the size of the company (SME or large company), impacting profit allocation and eligibility for reliefs.
• Tax Reliefs and Credits: Existing tax reliefs and credits (such as R&D expenditure credits, land remediation relief, and film/television/video game tax relief) are modified to account for the new Northern Ireland rate, ensuring that companies receive appropriate benefits.
• Partnerships: The bill includes rules for how the new system will apply to companies operating as partners within Northern Ireland firms.
• Capital Allowances: Amendments to the Capital Allowances Act 2001 adjust capital allowances to reflect the separate Northern Ireland corporation tax rate.
• Excluded Trades and Activities: Certain trades and activities, like oil extraction and some financial services are excluded from the Northern Ireland rate.

Government Spending

The bill's financial impact is complex and depends entirely on the rate set by the Northern Ireland Assembly. A lower rate could lead to reduced corporation tax revenue for the UK government, potentially requiring adjustments to other areas of government spending or tax policies to compensate. Conversely, a higher rate could lead to increased revenue. Specific figures are not provided in the bill itself.

Groups Affected

• Businesses in Northern Ireland: May benefit from a lower corporation tax rate, encouraging investment and economic growth in Northern Ireland. A higher rate would have the opposite effect.
• UK Government: The UK government's tax revenue will be impacted depending on the rate set by the Northern Ireland Assembly.
• Northern Ireland Assembly: Will have the power to set the corporation tax rate for Northern Ireland.
• HM Revenue & Customs (HMRC): Will be responsible for administering the new tax system and making necessary adjustments to existing tax collection processes.

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