The Keytime team looks at proposed tax changes and the questions accountants have been asking as the stalemate in Northern Ireland's Government continues
It was a momentous occasion when 1998’s Good Friday Agreement brought peace to Northern Ireland and a devolved Government. The Northern Ireland Assembly united republicans and unionists to lead the country, set laws and legislation, foster economic development and safeguard public services. This was the story for almost two decades – until power-sharing broke down in 2017.
What started as a disagreement over a failed green energy scheme, ended with a breakdown in the relationship between the Democratic Unionist Party and Sinn Féin, leaving Northern Ireland without a functioning elected government. There have been repeated attempts to resurrect this complex agreement, but talks have failed so far.
Who’s in charge?
It is now around 1,000 days since Northern Ireland had an operational government – bar a brief sitting in Stormont that hit the news on 21st October. In previous times of turbulence, the UK imposed direct rule from Westminster. This time it has not, instead urging parties to return to power. Meanwhile, it has legislated where necessary; sharing £410million in the 2018-19 budget, setting essential rates and fast-tracking two NI-specific Bills through the House of Commons.
Civil servants run public services and the day-to-day running of the country; despite being limited as to what decisions they can make without MPs. The Head of the NI Civil Service said that without the ability to develop and change policy, no progress can be made on reforms and there is the risk of “stagnation and decay.” This is also true of important initiatives that could support the business community, which have been put on the back burner.
Will corporation tax change?
One plan on pause is the reduction in corporation tax. Northern Ireland was to set its own corporation tax rate, slashing it to 12.5%, putting it on a par with the Republic of Ireland. The tax cut was one of the key components in Northern Ireland's drive to attract and retain businesses – and had been dubbed an ‘economic game changer’. It should have come into effect by now, but with the Assembly in stasis, the future of the policy is in doubt.
A significant amount of investment has been made in the corporation tax change – £380,000 spent on a new IT system and £35,000 on research – so the infrastructure is there to make it happen. There is a huge support too, with political parties and the NI Chamber of Commerce and Industry saying it has the potential to attract inward investors and create thousands of jobs.
What next for legislation?
The final tax devolution must be agreed between the UK Government and the Northern Ireland Executive, which obviously can’t be done without a functioning Assembly. So, what does the future hold for a land in political limbo – and what toll is it taking on accountants in Northern Ireland?
The Keytime team has received numerous queries and had many conversations with customers with clients in Northern Ireland, stemming from the appearance of additional boxes on the CT600 and the inclusion of the new CT600G supplementary pages. Although Keytime will not allow you to make any entries in these boxes or pages, HMRC has included them in preparation for the change.
It feels like change is afoot; a fleeting restoration of the Assembly on 21st October gave hope that, when pressed, a Government could meet on key issues. With stalled plans for corporation tax, high business rates and outdated legislation, the Northern Irish business community is understandably eager for a Government to reform and move forwards.
How about Brexit?
There is still no consensus on what Brexit will mean for Northern Ireland. The Prime Minister had proposed giving powers to the Assembly to decide if NI will remain aligned with EU regulations post-Brexit. Arlene Foster commented that if Stormont remains suspended, a ‘grand committee’ of local MPs could determine post-Brexit trading agreements. However, since then the withdrawal bill was defeated in Parliament; the DUP voted against it and criticised the Prime Minister.
Currently, a Brexit delay seems likely. This issue has dominated the UK’s political landscape and – combined with the controversy about the backstop – stymied political progress in Northern Ireland. Inevitably Brexit must reach a conclusion soon, and it could be the topic that forces the Assembly together once more out of sheer necessity. Either way, once we move on from Brexit, it surely means Northern Ireland’s political situation can return to the agenda and command the focus it needs and deserves.