Northern Ireland signs MoU on setting corporation tax rate

Northern Ireland has moved one step closer to setting its own corporation tax rate when its Department of Finance and Personnel signed a memorandum of understanding (MoU) with HMRC, Economia reports.

This sets out the arrangements for developing the necessary systems for devolving the tax, which will still be administered by HMRC.

Transfer of the taxing power is contingent on the Northern Ireland executive demonstrating that its finances are on a sustainable footing, including successfully implementing measures in the Stormont House agreement and subsequent reforms.

However, in November last year, the executive announced that it had agreed to implement NICT from April 2018 at a rate of 12.5 per cent, which matches the rate of corporation tax in Ireland.

According to estimates from Ulster University’s Economic Policy Centre, the change will result in 33,000 more jobs and output nine per cent higher by 2033.

Under the MoU, HMRC will identify those companies that will have to pay Northern Ireland corporation tax (NICT). Larger companies will pay NICT on qualifying trading profits if they have a permanent place of business in Northern Ireland, and the profits to be taxed at the NI rate will be allocated according to rules based on international profit allocation.

SMEs that have at least 75 per cent of their employment costs and time arising in Northern Ireland will pay NICT on all their qualifying UK trading profits.