2 in 3 Chartered Accountants surveyed in Northern Ireland favour the introduction of a devolved corporation tax rate for the region, according to Chartered Accountants Ireland, with almost 9 in 10 of those in favour of the belief that the rate should be less that the current 19%. The Institute, which represents almost 5,000 accountants working in Northern Ireland, surveyed members on the occasion of the launch of its annual position paper, The Next Financial Year.
In The Next Financial Year, the Institute highlights the potential of a lower, competitive rate of corporation tax and the benefits it could bring to the region. It is one of a range of measures in the position paper that represent an innovative approach to supporting business and helping the Northern Ireland economy rebound after the COVID-19 pandemic.
Commenting, Paul Henry, President, Chartered Accountants Ireland said
“We have long favoured the consideration of a devolved rate of corporate tax in the region, and the fundamental reasons to introduce this in Northern Ireland are unchanged. A lower, competitive rate, coupled with the dual benefit of having access to both the UK and the EU’s single market for goods, would put Northern Ireland in a unique position to also attract foreign direct investment, particularly in manufacturing and distribution.
“An increase in the main rate of corporation tax in the UK from April 2023, the UK’s exit from the EU, and the establishment of an independent Fiscal Commission by the Northern Ireland Executive make this a timely issue. I look forward to leading an Institute delegation to meet with the Fiscal Commission on this issue next week.”
Foreign direct investment has remained strong in the region, with 6,000 more companies operating in Northern Ireland than in 2016. Northern Ireland is now home to more than 1,100 international companies, employing 100,000 people.
Other areas of focus in The Next Financial Year:
Targeted government supports
Chartered Accountants Ireland is calling for an extension of COVID-19 business supports, such as the Coronavirus Job Retention Scheme (CJRS) and Self-Employment Income Support Scheme (SEISS) until at least the end of 2021, in a targeted way that allows viable businesses the flexibility they need to recover and grow.
Leontia Doran, Taxation Specialist (NI), Chartered Accountants Ireland noted:
“A premature withdrawal of government supports must be avoided to mitigate the impact of the crisis and allow viable businesses a fighting chance of survival. The announcement of a further extension to the CJRS should be made as soon as possible so that businesses can plan ahead.
“While many businesses have now resumed trading, financial pressures are coming to a head as they reopen, often with reduced capacity and staff resourcing constraints. In addition, while banks and other creditors might have stood down collection and enforcement activities during the third national lockdown, as trading begins, the pressure will come to bear on any cash reserves that businesses may have.”
Recognising the challenges faced by the hospitality sector, The Next Financial Year proposes that the 5% reduced VAT rate remains beyond 30 September 2021, when it is currently due to end, until at least 31 March 2022. At this point, the rate should move to a proposed interim level of 12.5% for a period of at least six months to protect jobs and livelihoods.
Sustainability
The paper also calls for the tax system to be used to enhance behavioural change and help Northern Ireland in its journey to net-zero carbon emissions by 2050 at the latest. Chartered Accountants Ireland calls for tax policy to be aligned clearly with decarbonisation objectives, which should achieve the desired result of steering investment and consumer choice in favour of low-carbon alternatives.
Noting the UK’s successful implementation of four taxes with explicit environmental objectives (the Climate Change Levy, the Carbon Price Support, the Landfill Tax, and the Aggregates Levy), the report suggests tax policies which support the adoption of sustainable home upgrades and low-emission cars. It also calls for the ‘Green Agenda’ to feature in all future UK Budgets.
Additional measures proposed by the Institute to support SMEs include
- The automatic deferral of self-assessment tax debt for amounts up to £30,000 for 2020/2021 should continue and should be extended to other taxes to allow businesses breathing space as they reopen.
- The re-introduction of the COVID-19 Business and Financial Planning Grant.
- A Processing and Marketing Grant for the agri-food sector to drive growth and create employment.
- Fairer and more accessible tax rules for remote workers, including a re-evaluation of ‘normal place of work’ for tax purposes and the rules for tax deductible expenses of employment.
- Maintaining the current rates of capital gains tax.
- Reviewing Business Asset Disposal Relief, including an evaluation of the impact of the reduced lifetime limit (£1m from £10m) on entrepreneurial behaviour.
- Tailoring R&D Tax Relief to facilitate the economic recovery by expanding the categories of qualifying expenditure and accelerating the payment of the tax credit to claimants.
Chartered Accountants Ulster Society will be hosting a hybrid, half day conference examining the key issues for business in 2022 on 18 November 2021, at ICC Belfast and online.
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