HMRC have updated draft guidance on the new Northern Ireland corporation tax regime which paves the way for a lower rate of corporation tax than the rest of the UK.

The Corporation Tax (Northern Ireland) Act 2015 allows for devolution of power to the Northern Ireland Assembly to set a Northern Ireland rate of corporation tax to apply to certain trading income:

  • The Northern Ireland Executive has committed to a rate of 12.5% from April 2018.
  • This will apply to most trading activities, with exclusions for oil and gas and the majority of financial activities.
  • It will apply to SMEs where the company’s employee time and costs fall largely in Northern Ireland
  • For large companies, it will apply to profits attributable to a Northern Ireland trading presence.
    • This is being extended to allow SME who are not Northern Ireland employers to opt into the large company scheme (Finance (No.2) Act 2017)
    • “Trading presence” is defined in line with the rules for Permanent Establishments in international cases
  • Similar rules will apply for corporate partners.

Devolution of the power will be completed once the Executive demonstrates its finances are on a sustainable footing.

Comments were invited on the draft guidance up to 1 January 2017.

In the meantime, in the Autumn 2017 budget it was announced that Finance Bill 2017-18 would include a provision to amend CTA 2010 to ensure that the Northern Ireland Education Authority, which has provided state funded education in Northern Ireland since 2015,  is exempt from corporation tax. This will bring Northern Ireland into line with England, Wales and Scotland in respect of the taxation of state education. The change will be backdated to April 2015.

Links

Northern Ireland Corporation Tax regime: Draft guidance

Corporation Tax: exemption for Northern Ireland Education Authority

Northern Ireland Corporation Tax Rate (subscriber guide)


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