Following on from the announcement in December’s Autumn Statement that the current government recognises the strongly held arguments for devolving corporation tax rate-setting powers to NI and the goal of rebalancing the NI economy, the Secretary of State for Northern Ireland last month announced the publication of the above Bill.

As part of the Stormont House Agreement, this Bill should allow Northern Ireland to set its own rate of corporation tax from April 2017. Chartered Accountants Ireland heralded the publication of the Bill as a base for realistic planning, not only for the Stormont Executive but also for prospective investors in the Northern Ireland economy. So what are the next steps?

In her statement on 8 January 2015 the Secretary of State Theresa Villiers confirmed the Government’s aim for the Bill to reach it final stages next month and to achieve Royal Assent before the General Election in May this year. However, progress of the Bill is dependent on the Executive Parties delivering on their commitments in the Stormont House Agreement. Provided the Bill is passed, the earliest possible implementation date is 1 April 2017.

The design of the NI CT tax regime in the Bill reflects the Government’s overarching principles:

• It must be attractive to businesses, including only having proportionate administrative burdens;
• It encourages genuine economic activity in Northern Ireland;
• Costs for the NI Executive must be proportionate and kept to a minimum; and
• It satisfies EU State aid rules

The Assembly will have the power to set the corporation tax rate over most trading profits in a new Northern Ireland corporation tax regime. It does not include non-trading profits such as income from property.

Power over the corporation tax base, including reliefs and allowances, will remain with the UK Parliament.

The regime has been carefully designed to enable the Northern Ireland Executive and Assembly to encourage genuine investment that will create jobs and growth, while minimising opportunities for avoidance and profit-shifting.

The legislation includes a special regime for smaller companies to avoid disproportionate administrative burdens and uses existing international rules for larger companies to avoid unnecessary complexity, while ensuring robust profit allocation.

The Bill also contains rules on the treatment of capital allowances and tax reliefs, including in the creative sector and in research and development, as well as on the treatment of profits and losses in Northern Ireland and the rest of the UK.

Profits from some trades - including lending and investing activities (including those of Treasury companies); asset management; finance leasing; long-term insurance (including life insurance) and reinsurance activities of both general and life insurance - will remain in the UK main regime. The UK’s oil and gas tax regime will also not be part of the Northern Ireland regime.

HMRC have also published a policy paper on devolution of corporation tax to NI; Chartered Accountants Ireland will be analysing the Bill and this policy paper in detail and providing appropriate input.

See the January issue of tax.point for the first of a two part feature by Martin Fleetwood and Michael Heinicke, PricewaterhouseCoopers Belfast, on corporation tax devolution and Northern Ireland. The second part will feature in the March issue of tax.point.