The Autumn Statement confirmed that we could see the devolution of corporation tax rate-setting powers to Northern Ireland, 'provided the Northern Ireland executive is able to manage the financial implications'.
What is the significance of this announcement?
John McMahon, partner at Johnsons Law: While the difficulty in managing the financial implications cannot be underestimated, the devolution of corporation tax powers to the Northern Ireland Executive will help engender the growth of our private sector and hopefully encourage new inward investment and job creation. It will also help Northern Irish businesses in industries such as aerospace and aviation to be more competitive on the world stage.
How will this development be viewed by businesses?
Hilary Griffith, corporate law legal director at Pinsent Masons: We have already had a sizeable increase in merger and acquisition activity from the post-recession years, particularly with overseas investors and acquirers. Well known corporates in Northern Ireland such as Phoenix Gas, Munster Simms, Schrader Electronics, Hughes Insurance have all been the target for acquisition for foreign investors or large international corporates seeing Northern Ireland as a sound and stable new market opportunity.
Growth by strategic acquisition is often a, if not the, fastest entry route to a new market. This is very likely to grow significantly following the stimulus of reduced corporation tax as overseas businesses seek to maximise the lower tax regime in Northern Ireland by way of acquisition. This will give an acquirer an immediate revenue and employment base to take advantage of our low tax rate.
How might this affect inward investment?
Paul Gillen, employment partner at Pinsent Masons: The devolution of corporation tax could have a significant impact on the employment sector. Greater inward investment could lead to a build-up of businesses unfamiliar with the particular compliance regime in employment terms in Northern Ireland, especially regarding fair employment and discrimination, which can impact from recruitment throughout employment.
Mergers and acquisitions may be a common feature as the economy adjusts to new circumstances. Similarly, there is a separate regime for the transfer of employees (under the Transfer of Undertakings (Protection of Employment) Regulations, SI 2006/246) that could be an alien concept for many organisations. Unfamiliarity with the regulatory landscape could create spikes in tribunal activity with employees seeking to reassert their legal rights.
Could there be any unintended consequences?
Eloise Walker, partner at Pinsent Masons: Although a possible reduction in corporation tax rates would bring many benefits for companies operating in Northern Ireland, there will be added complexities. Northern Irish companies which undertake activities across the UK may encounter increased administrative and compliance burdens, since they would now be operating in two separate tax regimes and therefore, would need to correctly allocate profits and losses between Northern Ireland and the rest of the UK.
What has been the reaction in Scotland?
Moira Kelly, chair of the Scottish Technical Sub-committee of the Chartered Institute of Taxation: I can understand why there are moves for Northern Ireland to get corporation tax powers, as it will help it to compete with the Republic of Ireland. However, I will be interested to see how the decision plays out in Scotland, particularly as the Scottish National Party had wanted corporation tax powers, but this was excluded from the Smith Commission report.
Interviewed by Rachel Moloney for LexisLibrary.
The Autumn Statement confirmed that we could see the devolution of corporation tax rate-setting powers to Northern Ireland, 'provided the Northern Ireland executive is able to manage the financial implications'.
What is the significance of this announcement?
John McMahon, partner at Johnsons Law: While the difficulty in managing the financial implications cannot be underestimated, the devolution of corporation tax powers to the Northern Ireland Executive will help engender the growth of our private sector and hopefully encourage new inward investment and job creation. It will also help Northern Irish businesses in industries such as aerospace and aviation to be more competitive on the world stage.
How will this development be viewed by businesses?
Hilary Griffith, corporate law legal director at Pinsent Masons: We have already had a sizeable increase in merger and acquisition activity from the post-recession years, particularly with overseas investors and acquirers. Well known corporates in Northern Ireland such as Phoenix Gas, Munster Simms, Schrader Electronics, Hughes Insurance have all been the target for acquisition for foreign investors or large international corporates seeing Northern Ireland as a sound and stable new market opportunity.
Growth by strategic acquisition is often a, if not the, fastest entry route to a new market. This is very likely to grow significantly following the stimulus of reduced corporation tax as overseas businesses seek to maximise the lower tax regime in Northern Ireland by way of acquisition. This will give an acquirer an immediate revenue and employment base to take advantage of our low tax rate.
How might this affect inward investment?
Paul Gillen, employment partner at Pinsent Masons: The devolution of corporation tax could have a significant impact on the employment sector. Greater inward investment could lead to a build-up of businesses unfamiliar with the particular compliance regime in employment terms in Northern Ireland, especially regarding fair employment and discrimination, which can impact from recruitment throughout employment.
Mergers and acquisitions may be a common feature as the economy adjusts to new circumstances. Similarly, there is a separate regime for the transfer of employees (under the Transfer of Undertakings (Protection of Employment) Regulations, SI 2006/246) that could be an alien concept for many organisations. Unfamiliarity with the regulatory landscape could create spikes in tribunal activity with employees seeking to reassert their legal rights.
Could there be any unintended consequences?
Eloise Walker, partner at Pinsent Masons: Although a possible reduction in corporation tax rates would bring many benefits for companies operating in Northern Ireland, there will be added complexities. Northern Irish companies which undertake activities across the UK may encounter increased administrative and compliance burdens, since they would now be operating in two separate tax regimes and therefore, would need to correctly allocate profits and losses between Northern Ireland and the rest of the UK.
What has been the reaction in Scotland?
Moira Kelly, chair of the Scottish Technical Sub-committee of the Chartered Institute of Taxation: I can understand why there are moves for Northern Ireland to get corporation tax powers, as it will help it to compete with the Republic of Ireland. However, I will be interested to see how the decision plays out in Scotland, particularly as the Scottish National Party had wanted corporation tax powers, but this was excluded from the Smith Commission report.
Interviewed by Rachel Moloney for LexisLibrary.
