Northern Ireland takes another step towards 12.5pc tax rate
The UK Revenue office has signed a memorandum of understanding (MoU) with the Northern Ireland Department of Finance setting out the arrangements for implementing a devolved corporation tax rate.
The MoU sets out the operational arrangements needed for devolving the tax, which will still be administered by HM Revenue & Customs (HMRC).
It marks another step forward in the North's efforts to lower its corporate tax rate in a bid to compete with the Republic.
The deal allowing Northern Ireland to set its corporate tax was secured as part of the Stormont House Agreement between the British and Irish governments and the North's five main parties.
Last November the Northern Ireland executive announced that it is to set a corporate tax rate of 12.5pc by April 2018, bringing it in line with the Republic. The UK rate, which currently applies to Northern Ireland, is 20pc although this is set to drop to 18pc by 2020.
According to the MoU, HMRC will handle the legwork and day-to-day operations related to the implentation of the tax.
It will develop and test an IT system for adminstration and will identify the companies that must pay the Northern Ireland rate. The Northern Ireland department of finance will be charged by HMRC for the management of the system.
The MoU adds that the start date will be subject to HMRC having enough time to develop the IT systems needed. The transfer of the power to set the tax rate is contingent on the Northern Ireland executive demonstrating that it can manage its own finances.
Nigel Smyth, director of business group CBI Northern Ireland, said the MoU will be welcomed by the organisation's members as "another milestone reached". However, he added: "Plenty of work remains on the part of the Executive to deliver this key policy commitment."
Stormont hopes the new tax rate will help give the private sector a shot in the arm. The region is heavily dependent on government spending and about two-thirds of its jobs are in the public sector.
Although there are fears that the new lower rate may result in companies locating in the North at the expense of the Republic, business group Ibec has welcomed the change, saying an all-island business model is in the interest of both sides of the border.