UK’s move to 25% corporation tax ‘will attract even more investors to the Republic’
Northern Ireland is more likely than ever to lose to the Republic from next year when corporation tax becomes double that of our neighbour, it has been claimed.
he Republic’s historic low-tax policy of charging just 12.5% has helped entice huge corporations like TikTok, Google, Apple and Facebook to set up shop across the border.
Northern Ireland is therefore the loser and the discussions on the reduction of corporation tax have not been successful.
From April next year, the main UK corporation tax rate will drop from 19% to 25%. The EU and the OECD have considered changing the rules so that a minimum rate of 15% applies.
Ross Boyd, director of RB+ Chartered Accountants, said the UK’s move to a 25% rate will make Northern Ireland a less attractive location compared to the Republic.
Additionally, the Republic has retained its full EU membership, which is another selling point. However, Northern Ireland remains within the single market for goods under the protocol.
Mr Boyd said: “The Northern Ireland corporate tax rate will increase for businesses generating profits over £250,000 to 25% in April 2023, in line with the UK rate. By comparison, the Republic’s effective rate for profits up to €750m is 12.5%, which by this time next year will be half our rate here in Northern Ireland. .
“This could make Northern Ireland a relatively unattractive investment location for potential companies looking to establish a base in the UK and/or EU. Maintaining a low corporate tax burden and securing access to the EU single market will ultimately remain the main drivers of foreign direct investment. Unfortunately for Northern Ireland, our neighbor offers both.
Mr Boyd said the loss of investment opportunities could hamper economic growth.
According to the Department of International Trade, foreign direct investment projects here created 2,351 new jobs in 2019-20.
Mr Boyd said factors in the Republic, such as higher income tax, could work against it. The cost of living is also much higher on the other side of the border.
He added: “It’s something that will have to be assessed on a case-by-case basis, but a corporation tax rate that is half that of Northern Ireland could ultimately encourage investors to look to the Republic. .”
He urged businesses in Northern Ireland to begin preparations for the new tax regime as soon as possible.
“My advice to local businesses would be to reassess your business structure both in the UK and in the EU to ensure you get the best rates available,” Mr Boyd said.
“Updated structures can be quite different and you will need to have a quality business plan in place and use good financial management to get the most out of these changes.
“With soaring inflation and a new era of supply chain insecurity, businesses need to plan more carefully than ever.”