The Chancellor's announcements not to increase the rate of Corporation Tax for smaller companies or the rate of Capital Gains Tax and his confirmation that Value Added Tax will not increase above 17.5% after 1 January 2010 are of particular significance to the Northern Ireland Economy, according to the Chairman of the Northern Ireland Tax Committee of Chartered Accountants Ireland, Mr Eamonn Donaghy.
"Typically, indigenous companies in Northern Ireland would pay Corporation Tax at the lower rate for smaller companies of 21%" said Mr Donaghy. "The Chancellor is not now proceeding with a plan to increase this rate, which will be of help for business in Northern Ireland. There was speculation that the Capital Gains Tax Rate would increase but the rate of tax on capital gains will remain at 18% and this should help to encourage business and share disposals. Also very important is the proposal for a special, 10% rate of corporation tax on income from UK patents. Whilst the proposal is that this will only take effect in 2013, Chartered Accountants Ireland welcome the proposal, having long emphasised Research and Development as key to economic renewal for Northern Ireland. The Chancellor has invited consultation on the best way to apply this reduced rate of tax, and we will engage with him on the matter".
"Northern Ireland has attracted a lot of consumer business from the South in recent months, in part because of the favourable Sterling/Euro exchange rates, but also because of the VAT holiday which was introduced just over a year ago. This reduction in the VAT rate, from 17.5% to 15%, was undoubtedly helpful as a stimulus. But the top rate of VAT will go back to 17.5% from 1 January 2010. It is to be welcomed that there is no planned increase in the rate beyond 17.5%. In general, it seems that Exchequer funds will no longer be available for big-ticket tax incentives or stimulus packages".
Chairman of the Chartered Accountants Ulster Society Mr Kevin Kingston said:
"Some of the increases to Income Tax from 6 April next year had already been flagged. The 0.5% increase in National Insurance Contributions is new and the details will require careful consideration, as will the 50% tax on certain bonuses from financial institutions. UK NIC is already quite high by international standards, and we have concerns about any amendments to the taxation of employees which will make it more costly to employ staff. Wages are a major factor in the cost of delivering goods and services; we need to contain taxes on wages to retain our competitive edge."
Chartered Accountants Ireland welcomes the various measures proposed in the Chancellor's statement which will contribute towards protecting the environment.
ENDS