Corporation tax for north's most profitable firms will soon reach double Republic's rate
CORPORATION tax for the north’s most profitable businesses will be twice that of the Republic in two years.
Chancellor Rishi Sunak confirmed in Wednesday’s Budget that corporation tax will increase from 19 to 25 per cent from April 2023, double the 12.5 per cent rate across the border.
Businesses with profits of £50,000 or less will continue to pay the 19 per cent rate, with a tapered rate for firms making more than £50,000.
But any business with profits exceeding £250,000 face the full 25 per cent.
It threatens to reignite the well-worn corporation tax debate in the corridors of Stormont, just over a year after the restored Executive appeared to drop it as an issue.
The power to lower corporation tax was devolved to Stormont in 2015, with parties uniting around a campaign to match the Republic’s 12.5 per cent rate by April 2018.
But the campaign lost all momentum through the subsequent collapse of the institutions.
New Finance Minister Conor Murphy was quick to pour cold water on the prospect of lowering the rate last year.
An immediate cut to corporation tax would in all likelihood slash the north's block grant, which is already under strain.
Chartered Accountants Ireland was among the bodies yesterday calling for the Executive to put the issue back on the table.
Norah Collender from the professional body said: “A lower rate of corporation tax in the region coupled with the dual benefit of having access to both the UK and the EU’s single market for goods could put Northern Ireland in a unique position to attract foreign direct investment into the region, particularly in the manufacturing and distribution sectors.”
But the sting from yesterday’s corporation tax announcement was somewhat soothed for businesses by what the Chancellor labelled the new ‘super deduction’, which will allow firms to offset the cost of new equipment against tax.
PwC tax specialist Aine O’Hare said the deduction will be extended to businesses investing in new plant and machinery in the next two years, providing allowances of 130 per cent on their costs.
She said the result could be a substantial tax cut for some firms.
“This remains key as attracting foreign direct investment into Northern Ireland is a major part of ensuring our economic recovery as we move towards a post-pandemic world outside of the EU,” she said.
NI Chamber chief executive Ann McGregor also welcomed the incentive.
“The super deduction will give businesses which are performing well the confidence to make capital investments and enable them to play a part in Northern Ireland’s economic recovery, through creating jobs and developing exports.”