On 17 March 2015 the House of Lords passed the Corporation Tax (Northern Ireland) Bill 2014-15. The government aims to pass the law before the upcoming May general election.
The Secretary of State, Rt Hon Theresa Villiers MP, has welcomed the development. The Bill provides for the creation of a Northern Ireland rate of corporation tax, thus devolving such tax from April 2017.
The main provisions that the Bill would introduce are as follows (summary from HMRC available here):
- The Northern Ireland Assembly will be responsible for setting the rate of corporation tax. It is expected that the rate will be reduced to 12.5% (if not below), to match the rate of the Republic of Ireland and thus encourage investment competition.
- The new rate will apply to Northern Ireland companies, meaning those that carry out a "qualifying trade" and pass either the SME or the large company test. Trades which are excluded and therefore not qualifying include, notably, financial activities such as lending and investing, asset management, long-term insurance (mainly life insurance), and reinsurance of both general and long-term insurance.
- Companies will treat their Northern Ireland trading activity as if it were a separate business from their activity in the rest of the UK, and apportion profits appropriately between the two.
- Regarding loss carry forward and group/consortium relief rules, similar amendments will apply. Such amendments will facilitate a potential rate differential, including the revaluation of Northern Ireland trading losses used to relieve profits arising in the UK main rate regime.