Belfast Telegraph

The Budget 2016: Sweet and sour result for Northern Ireland as UK corporation tax slashed but fuel duty eased

By John Mulgrew

Northern Ireland businesses were handed a double-edged sword after Chancellor George Osborne revealed he was cutting the rate of corporation tax across the UK as a whole.

In his spring Budget, Mr Osborne said he would cut the business levy from its current 20% rate to 17% from April 2020.

That shrinks the gap with Northern Ireland's proposed 12.5% tax rate, set for 2018.

While that means Stormont could save tens of millions as the shortfall in funding is reduced, it will "also reduce the competitive advantage that the lower tax rate policy will give us", according to FSB policy chair Wilfred Mitchell.

Neville Crowe, EY tax director, said: "It's double-edged. In marketing Northern Ireland, we will have to focus our minds overall. That will include concentrating on sectors, the whole package."

PwC economist Dr Esmond Birnie said the move reinforced the argument that slashing the rate "can only be one of a number of things we've got to get right" to attract business here.

Elsewhere, firms here are also set to get a much-needed boost from a freeze on fuel duty. Seamus Leheny, of the Freight Transport Association, said even a 1p increase could have added £470 a year for average fuel bills per lorry.

Ulster Bank chief economist Richard Ramsey said other "businesses-friendly measures included £1bn of tax support for the oil and gas industry, cutting business rates for all ratepayers, and a new stamp duty regime for commercial property".

Michael Hall, managing partner at EY, said it was a "sweet and sour Budget, with big businesses paying for the cuts for small ones".

"There is the sweet taste of stimulus for small businesses, whether positively through business rates or neutrally in exceptions to tax relief restriction."

Writing in today's Belfast Telegraph, George Osborne said he was working alongside Northern Ireland Secretary Theresa Villiers "towards the devolution of corporation tax".

"It's now vital the Executive continue to press on with the programme of reform needed to ensure the financial sustainability we require to confirm corporation tax devolution," he wrote.

Coleraine is also set to get an extra cash allowance from the Treasury for the creation of its enterprise zone.

The Chancellor revealed that the Office of Budget Responsibility (OBR) had downgraded its forecast for GDP for 2.4% to 2% this year, from 2.5% to 2.2% in 2017 and from 2.4% to 2.1% in 2018.

Stephen Kelly of Manufacturing NI said with Northern Ireland's largest external market in Great Britain, "it's disappointing that growth predictions have been downgraded".

"On the up side, it appears the Executive will receive some £200m as a result of the Barnett consequential and the reduction of the rate of corporation tax makes a Northern Ireland rate more affordable," he added,

CBI regional director Nigel Smyth said businesses here would "welcome the reduction in the capital gains tax rate and support for the self-employed".

Glyn Roberts of the Northern Ireland Independent Retail Trade Association said that the "cutting of corporation tax to 17% will clearly reduce the cost of a local 12.5% for the Executive". Members with vans would also welcome the freezing in fuel duty.

Pubs, restaurants and off-licences across Northern Ireland are also likely to benefit from a freeze on an increase in duty for alcohol. And Colin Neill, from Hospitality Ulster, welcomed the freeze.

BDO partner Maybeth Shaw said that the extension of the 10% rate of capital gains tax "should help stimulate investment in trading companies".

Mr Osborne also moved to clamp down on multinationals that seek to avoid taxes through complex structures.

Ann McGregor, head of the Northern Ireland Chamber of Commerce and Industry, said there were "some welcome elements of the budget, particularly for small businesses in terms of tax relief and stimulus for investment".

The Chancellor also announced an increase in the personal tax allowance to £11,500, and a higher rate tax threshold to £45,000. Both will come into effect in April 2017.

Aodhan Connolly, director of the Northern Ireland Retail Consortium, said that would bring a boost to consumers, with a "faster increase in the personal income tax allowance and in the higher rate threshold".

Caroline Keenan, tax director at ASM Chartered Accountants, said the Chancellor "will be hoping for a positive response from the electorate to his Budget measures".

Belfast Telegraph