Business

Corporation tax opportunity 'must not be lost' says accountancy body chair

Corporation tax setting powers could be dead in the water for Stormont after the latest political crisis
Corporation tax setting powers could be dead in the water for Stormont after the latest political crisis Corporation tax setting powers could be dead in the water for Stormont after the latest political crisis

THE current political impasse "mustn't be allowed to jeopardise the efforts that have gone into delivering corporation tax devolution" a leading tax expert has insisted.

But the plea from Paddy Harty, chair of the NI tax committee of Chartered Accountants Ireland (CAI), seems certain to be falling on deaf ears, as the collapse of the Stormont administration may have scuppered plans to slash the business tax rate to 12.5 per cent from April next year.

Although the vital legislation which sets out how the north's corporation tax regime will operate approaches its second birthday in March, crucially it needs a final green light from the Executive, which of course is no longer in place.

Among the other hurdles is that the Assembly must pass a rate recommended by the finance minister in the year before it applies - and that piece of work would have to be done in the four weeks immediately after the March 2 snap election, assuming the parties can agree to go back into government.

And given the potential cost of the Renewable Heat Incentive scandal to the Northern Ireland block grant over the next two decades, there could be a reticence anyway to shell out possibly £200 million more every year to fund the fiscal measure.

But while accepting that enacting the legislation on corporation tax without a functioning Stormont government "remains the critical part", Mr Harty is refusing to throw in the towel.

"There are clearly defined rate-setting arrangements needed to 'switch on' the Northern Ireland corporation tax rate. It requires Treasury regulations to be legislated for, and that aspect is subject to some very specific conditions," said Mr Harty, a senior tax director with Newry-based PKF-FPM Accountants.

"As set out in the Fresh Start agreement, this requires the continued commitment of the Executive to 'take all the actions necessary to demonstrate that its finances are on a sustainable footing for the long term'. Without an Executive in place there will be no budget for 2017-18 and therefore it cannot do that.

"Along with the political system and many other organisations in civil society, CAI has worked for corporation tax devolution and is acutely aware of the benefits that low rate can bring.

"It is not a giveaway to business but stimulates investment by new business and reinvestment by existing firms. It is not all about providing tax breaks for multinationals. Companies which do not meet the SME employer test can still elect into the regime and obtain the benefit of the corporation tax rate if it has a Northern Ireland regional establishment. This will be of most benefit to the indigenous sector.

"So the current political crisis should not be allowed to jeopardise the efforts that have gone into delivering corporation tax devolution to where it is now.

"The opportunity this tax presents should not be allowed to simply pass by as a victim of the impasse. It must be seized so that businesses can put plans in place in advance of the provisional date for the start of the regime in April 2018."

Mr Harty added: "It must be made clear that Northern Ireland is open for business and a lower rate of corporation tax is as vital a tool as ever in the region’s economic growth toolbox."