Corporate tax hike could put Northern Ireland in trouble

Consulting firm RB+ Chartered Accountants warns that the impending rise in Northern Ireland’s corporate tax rate from 19% to 25% in April 2023 could make it a less attractive option than the Republic of Ireland for investors.

Director Ross Boyd says the Republic of Ireland’s 12.5% ​​rate, coupled with EU membership, could make NI’s closest neighbor a more attractive location for potential investors.

Global organizations such as Facebook, Google, Tik Tok and Apple have already chosen to establish bases in Ireland. An uncompetitive corporate tax rate headlining the North could see this trend continue.

“The Northern Ireland corporate tax rate will increase for companies generating profits over £250,000 to 25% in April 2023, in line with the UK rate,” Boyd said.

“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. North.

“This could make Northern Ireland a relatively unattractive investment location for potential companies looking to establish a base in the UK and/or EU.

“Keeping corporate taxes low 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.

Boyd said blocked investment in Northern Ireland could have a significant impact on the local business landscape, hampering economic growth and restricting the availability of quality jobs.

Statistics released by the Department for International Trade in 2020* show that new foreign direct investment projects in Northern Ireland created 2,351 new jobs in 2019-20. However, Boyd said it would be an oversimplification to suggest that the corporate tax rate alone would deter potential investors in Northern Ireland.

“Of course, it’s not as simple as it looks – there are complexities,” he said. “Income tax in the Republic, for example, is considered to be higher than in the UK by around almost 3% assuming higher average wages.

“However, employers’ taxes are lower unless companies can take advantage of attractive UK depreciation super deductions, research and development relief or capital gains tax rates.

“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.

“This is a huge change for small businesses, the increase will end the benefits of an effective limited liability company model for many owners and will impact after-tax profits. It’s never too soon to seek expert help and start making changes to help alleviate this.

“My advice to local businesses would be to reassess your business structure both in the UK and EU to ensure you get the best rates available. Updated structures can be quite different and you will need to put implement a quality business plan and use good financial management to make the most of these changes.

“With soaring inflation and a new era of supply chain insecurity, companies need to plan more carefully than ever. Our analysis shows that successful companies have a solid plan and information accurate and up-to-date financial information.

“I would also suggest that companies adopt new technologies to increase overall productivity in anticipation of the increase.”

* DIT’s Inbound Investment results can be viewed on the Department for International Trade’s 2019 to 2020 Inbound Investment Results page on the GOV.UK website.