Posted on Wednesday 11 April 2012 by Ulster Business

Budget

Robert Heron and Michael Hall of E&Y

Chancellor George Osborne’s decision to lower UK corporation tax in the recent Budget could play an important role in whether the power to set the rate of corporation tax is devolved to Northern Ireland.

That was the view of Michael Hall, Managing Partner at Ernst & Young in Belfast, following what he described as a Budget that was “largely pro-busines‚” but‚ “the margins rather than being very supportive.”

Speaking to Ulster Business he said the Chancellor’s move to lower corporation tax to 22% and signalling that he is heading for a 20% rate could work in Northern Ireland’s favour.

“The eyes are all on the corporation tax debate that we are having locally and hopefully we’ll have an announcement before the summer,” said Mr Hall, who is part of the Economic Reform Group that has been lobbying for Northern Ireland to be able to cut corporation tax to at least in line with the Republic’s 12.5% rate.

“It will be interesting to see if Scotland backs away. Scotland has been complicating things because it was pushing for 20%. Now that the Chancellor has come out and said he has the aspiration for a 20% rate, does that mean that they withdraw. If they do, I think we’ll have a straight run at it,” he added.

“For Northern Ireland, the fact that the rate has been lowered means it will cost less, because we have to fund the difference ourselves. The figure quoted at the moment is about £300m. If you take the rate down to 20%, that’s probably another £30m reduction. It is not going to make it or break it, but it is helpful.”

While Mr Hall said the “transformational” measure for Northern Ireland’s economy remains corporation tax setting powers, he also said the province must not lose sight of other key issues – in particular growing skills shortages and access to finance for businesses.

Key measures introduced in the Budget that were of particular relevance to Northern Ireland included:

•An increase in income tax personal allowance by £1,100 to £9,205 which will benefit 605,000 people here and lift 25,000 out of income tax from April 2011.

• Confirmation of plans to devolve the power to set Air Passenger Duty to Stormont.

• Tax relief for video game, animation and high-end television industry.

• Up to £13.7m investment in Belfast to deliver ultra-fast broadband.

• Increased investment in mobile infrastructure along the A2 coast road and A29 between Coleraine and Armagh.

• A delay in the planned increase in the aggregates levy rate.

• £14.3m of additional public funding through Barnett consequentials.

• UK corporation tax to be cut to 22% by 2014.

• 50p tax rate to be cut to 45p from April 2013.

• 3p fuel duty rise to go ahead as planned.

Robert Heron and Michael Hall of E&Y

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