Corporation Tax : a day late and a dollar short

Not for the first time, the vexed issue of the plan to reduce corporation tax in Northern Ireland is  in the news again in the midst of ongoing controversy about how much it will cost to implement the tax cut, and to what extent it will benefit the economy here.

Corporation tax is a rare example of a headline economic policy that enjoys public support across the respective leaderships of both the DUP and Sinn Féin. While Sammy Wilson, particularly during his time as Finance Minister, was cold on the idea (it should be noted that Wilson has a greater claim to credibility on the subject of economics than any other elected representative in NI), the new DUP Leader, Arlene Foster, has been an advocate of the cut for some time – even lobbying at one point to set the rate lower than that of the Irish republic. At the DUP Spring conference, Arlene Foster named the reduction of Corporation Tax as one of her five priorities. The Sinn Féin leadership, particularly key figures such as Martin McGuinness and Máirtín Ó Muilleoir, have also been on the record pressing home the case for the benefits of the tax reduction. The leadership of both parties ensured that a pledge to cut the tax was included in the Fresh Start agreement.

Alongside the party leaderships, the Conservatives, who are better known for their disinterest in pressing for progress in NI, have shown rare initiative in pushing the corporation tax cut onto the agenda in Northern Ireland. Labour were noticeably cool on the issue while in government, but the Tories made it a manifesto commitment in 2010. It’s likely that the Conservatives see Northern Ireland as an economic testbed for corporation tax reform, believing that if it is successful here, they will be able to easily make the case for cutting it throughout the UK.

However, the overwhelmingly positive gloss placed upon the capacity of a corporation tax cut to deliver jobs and prosperity belies the lack of real detail on the implementation, the cost, and the expected outcome. Analysis of the subject does not appear to have progressed beyond the simplistic perspective that the economic success enjoyed in the Republic of Ireland can be replicated in Northern Ireland by isolating and duplicating one specific part of their fiscal policy.

The enabling legislation, the Corporation Tax (Northern Ireland) Act 2015, is mostly impenetrable to anyone without a background in tax law, but with public service in mind, and fortified with coffee, I summoned up the courage to try to make sense of it.

As might be expected, the energy, continental shelf exploration (ie drilling for oil and gas) and financial services industries are excluded from the reduced rate – an obvious provision to prevent the City of London from relocating to the Titanic Quarter. To avail of the reduced rate of tax, companies have to either be a small or medium enterprise registered in Northern Ireland (SME), or have a presence in Northern Ireland (known as an “NIRE” or “Northern Ireland Regional Establishment”). In either case the organisation must employ 75% of its workforce in Northern Ireland. Crucially, the organisation can only claim the reduced rate of corporation tax on profits that are attributable to its activities carried out by its employees in Northern Ireland. There is a great deal of detail regulating these provisions, likely reflecting an objective to prevent abuse in the form of brass-plate tax avoidance operations.

An obvious initial observation here is that any firm wishing to benefit from the reduced rate of corporation tax will have to make extra accounting provision which will add complexity and overhead for its finance team. For example, a large employer registered in the UK with a regional office in Belfast, which books its revenue and handles payroll in London, will need to reorganise its accounts to monitor the revenue – and profit – attributable to employees in its Belfast office. In many cases this will not be at all straightforward – how, for example, do you attribute profit to a Belfast-based marketing design or software engineering team ? The need to obtain additional expert accounting and legal services to ensure proper compliance with the law while maximizing the return may end up eating a significant part of the expected tax benefit.

This is quite a significant concern given the objective of the legislation to allow Northern Ireland to compete with the corporation tax rate in Ireland. There, it is not necessary to have special accounting measures, or to comply with complex requirements around staff and where they are based. The Irish tax rate is simple, straightforward, and applies without special exclusions or conditions today.

The UK legislation is not the only source of many of the unanswered questions and issues posed by the policy; many of our worthwhile businesses will not benefit from a low rate of corporation tax. Any business which is not a corporation, such as a sole proprietor, or a limited liability partnership, cannot benefit. Small startups, especially in the high-tech industry, make losses for several years while they work on bringing their product to market and expanding their market presence. Companies which choose to make a loss while investing in expansion will also not benefit. Furthermore, many of Northern Ireland’s existing high-tech employers will not benefit, as even when in many cases they employ anywhere up to 1000 staff in high quality, business critical jobs, they cannot easily book their profit in this jurisdiction.

Many of these existing employers are already struggling with what is an increasingly hostile business environment in Northern Ireland. Business rates are an ongoing issue, and energy costs are an even more serious matter which the Executive has been dragging its heels to resolve. The Executive appears to be short on ideas for how to deal with any of this, with no mention of any of these problems appearing in Fresh Start.

On the other hand, immediate and direct beneficiaries of the reduced corporation tax rate will be organisations such as supermarkets and call centres, who already have significant local corporate undertakings in Northern Ireland. The nature of these lower skilled, low margin businesses makes accounting for Northern Ireland profits relatively straightforward; and many of them have in-house legal and accounting teams who will be well placed to ensure the necessary compliance.

The problems get worse when you consider that the Treasury plans to deduct the losses associated with the low corporation tax rate from the Northern Ireland block grant. Confusion reigns over exactly how much will be deducted, as our political leaders chose not to require the Treasury to make any specific commitments on this as part of the Fresh Start agreement. An annual figure as high as £300m per year has been quoted. This is money that will have to be raised by raising revenue or cutting public services even further. In Ireland, this is a relatively straightforward political matter as the government has the power to offset the revenue losses with increased income tax rates, VAT rates, road toll charges, car taxes, water charges, and fees for healthcare and prescriptions. In Northern Ireland, none of the Executive’s political leaders have shown any willingness to confront local people with ways to increase revenue, beyond raising the regional rate.

As well as claiming back the corporation tax losses from the Northern Ireland block grant, the Treasury has made no commitments to allow Northern Ireland to share in the increased yields of income tax, VAT, fuel duty and so on that would arise from any increased levels of employment within NI. As noted above, while the Irish government can recoup any revenue loss associated the low rate of corporation tax, in Northern Ireland these increased yields are effectively invisible.

It is a bizarre twist of irony that the Executive could well end up increasing cost burdens on existing businesses, startups and high-tech investors by cutting spending on quality education, raising business rates, and cancelling any putative support into assisting with reducing energy costs, to support a tax reduction that makes it more profitable to operate call centres and supermarkets here.

These are concerns that appear, belatedly, to have encroached upon the thinking of some representatives within Sinn Féin. The ink on the Fresh Start deal was barely dry when some elements of the party began attempting to renegotiate it in public. Sinn Féin group leader on Belfast City Council, Jim McVeigh, was first out of the blocks, saying :

We won’t be signing up to any cut unless we afford it and we won’t be able to afford it any time soon.

More recently, Chris Hazzard appeared to question the entire premise of the proposal:

Corporation tax isn’t going to be the silver bullet that a lot of people think that it is. The Fresh Start Agreement says ‘if it is affordable, we will agree’

Taking to Twitter, his party colleague, senior MLA Alex Maskey, went further, saying that the corporation tax cut would depend on “quality jobs” being created.

In each case, these representatives were going on record with their imagination of what their party committed to, rather than the reality. Contrary to some claims, Sinn Féin have already signed up to the corporation tax cut – as part of its commitment to the Fresh Start deal. Section 1.19 :

On this basis: The NI Executive commits to a commencement date of April 2018, and a Northern Ireland rate of 12.5%.

Further contrary to some of these claims, there are no affordability constraints included in the deal, and there are no conditions around the creation of “quality jobs”. Instead, the deal commits the Executive to economic reform. Section 1.18 says :

In accordance with the requirements of the Stormont House Agreement, the Executive reaffirms its commitment to take all the actions necessary to demonstrate that its finances are on a sustainable footing for the long term including successfully implementing measures in the Stormont House Agreement, this Agreement and subsequent reform measures.

Investors are not gamblers, and they will not make an investment on the basis of a policy which is subject to unilateral withdrawal. They must be persuaded that decisions are taken for the long haul.

Despite the unambiguous commitment in the deal, and the assertion of Arlene Foster that the matter is agreed, the path is being cleared for Sinn Féin to walk away from it. Under the legislation, the new tax rate must be proposed by the Finance Minister and passed on a cross-community basis in the assembly. This means that nationalists can simply veto the new rate when the vote is taken. Crucially, the new rate will be very difficult to reverse, as the reversal would similarly require both a Finance Minister proposal to increase the rate, and the assent of unionists during the following cross community vote. The “stickiness” of the rate cut will serve to strengthen the hand of nationalists trying to prevent its implementation in the first instance.

The “will they/won’t they” ongoing discussion of a deal which is supposed to have already been sealed is a symptom of a problem much more serious than our regional fiscal policies. The signal being sent out to the world is that when Northern Irish politicians sign up to a deal, you can’t trust that they’ll stick to it; you can’t be sure that, having enticed you in the door with your money, that they won’t pull the rug out from under you. Most people understand that politicking is a reality, but Northern Ireland must be one of the few western jurisdictions where politicians are willing to undermine investor confidence with endless ambiguity to suit their own parochial political concerns.

This does not compare favourably with the conduct shown by our neighbours to the south. While Ireland has something of a reputation for corruption and brown envelope politics, politicians do understand the needs of business and, more importantly, the duty that sometimes falls upon politicians to make decisions for the good of the country that will certainly do them short-term electoral harm. The self-sacrifice of the Irish Green party, and Fine Gael’s re-installation as a minority Irish government, are good recent examples. How can investors be expected to take risks when political leaders here will not ?

The endless bickering, blocking and delay has real costs. While local politicians have endlessly fiddled and wrung their hands over corporation tax, the Irish government moved to compete even more aggressively in this area, with a 6.25% knowledge development box arrangement which undercuts the UK’s patent box rate of 10%. And while we spent a couple of years fiddling and sending out mixed messages over domestic air passenger duty, the Irish government moved quickly in response to industry calls and undercut us, leading to industry accusations of “bottling it“.

The proposals to cut corporation tax, if they are implemented by the Fresh Start schedule of 2018, will have come after nearly 8 years of endless prevaricating and debates which ultimately produced nothing in the way of policy detail on the issue. They impose additional accounting and compliance complexity upon businesses, as well as costs to the Northern Ireland budget. They cannot be reversed, and there is no guarantee that they will yield any kind of worthwhile return. Why on earth would any investor bet the shop on a jurisdiction which thinks that a half-baked, poorly conceived gimmick is an adequate substitute for stable government and responsible, sustainable public finances – and why should any Northern Ireland voter continue to endorse this charade ?

Software engineer living and working in greater Belfast. Pragmatic social democrat with the odd leaning towards capitalism. Political interests include economic policy, social and political reform.

Alliance Party member, but writing in a strictly personal capacity.

  • jm

    Great read, thanks.
    I’ve always thought that the significant loss from the block grant cannot be justified against the ‘job creation’ that lowering corporation tax will bring. We don’t have the infrastructure to attract any business other than the call centres cited in this article.

    From a selfish point of view as a (very) small business owner I immediately copped on that any financial gain on my having a smaller corporation tax bill will be wiped out by an increase in business rates. Where else will they look for the money?

  • Graham Parsons

    What infrastructure you do need to develop a software product? A laptop/pc, a broadband connection and a toilet.

    What attracts inward investment is a skilled workforce, not corporation tax rates.

  • Kevin Breslin

    Brendan, you chickened out when you say the “legislation is completely impenetrable to anything but a tax lawyer”.

    I’ve read short stories less than this, and to be honest they don’t contain definitions and equations in their content. This blog’s length alone probably is longer than two sections of the legislation.

    2 hours you could probably read the whole thing without a taxation qualification, or a headache.

  • jm

    Yes, that’s my business area. The skilled workforce in this arena in Northern Ireland is produced by the businesses here who take people on and teach them. Neither university can claim they produce the skilled workforce in this particular field, in my opinion.

  • chrisjones2

    .”Why on earth would any investor bet the shop …..” ..and have to deal with the endemic back-scratching, cronyism, extortion and petty corruption that now thrives here?

  • scepticacademic

    An excellent piece Brendan. As a business school academic myself, with an interest in FDI and some level of knowledge of the (southern) Irish experience, I’ve long been highly skeptical about the alleged benefits of the CT cut. Academic colleagues that I speak to share my skepticism. You are correct in highlighting some of the complexities and issues that may ‘muddy the water’ from a business perspective – and in drawing attention to the stunning lack of policy detail after 8 yrs of lobbying and wrangling. I’m yet to see a coherent and detailed set of arguments for how exactly the CT cut will benefit the NI economy – i.e. precise mechanisms and impacts on business investment and firm location decisions (either local or foreign). The case seems to be based on naive and selective analysis of the (southern) Irish experience and a large dose of wishful thinking. There has been a stunning failure to engage in ‘joined-up thinking’ on the issue – e.g. failure to reform FE or adequately fund an HE expansion to provide the skills pipeline for any future investors who might be attracted, lack of a coherent infrastructure investment plan based on an ‘economic vision’, etc. Having said that, we shouldn’t really been surprised has NI has a history of ‘failed’ economic strategies dating back to the direct rule era and beyond.

  • scepticacademic

    Ok, you are right about the workforce but large inward investors who do (or might do) software development, other IT work or other types of skilled service work here will also need some physical infrastructure – e.g. affordable modern office space – and don’t overlook the importance of air connectivity.

  • SeaanUiNeill

    “Cargo cults are marked by a number of common characteristics, including a “myth-dream” that is a synthesis of indigenous and foreign elements; the expectation of help from the ancestors; charismatic leaders; and lastly, belief in the appearance of an abundance of goods.”

    Not just in Melanesia then, and not so much charisma needed here…………

    Seriously, scepticacademic, I fully agree with you that this is what seemingly happens when those elected to the Assembly simply try for “easy solution magic fixes” instead of developing a far less glamorous but rather more comprehensive approach to developing an actual economy here.

  • SDLP supporter

    Brendan, excellent post, and I shamelessly reserve the right to pinch some of your observations for SDLP purposes. It was the SDLP who first put forward the Corporation Tax idea nearly two decades (feel rather ambivalent about that) but I feel that the western world zeitgeist is moving against tax avoidance/evasion and most of that is centered on corporation tax avoidance/evasion.

    Recent telling quotes about taxation from two of the wealthiest and achievement-laden people in the US.

    First up, Bill Gates, founder of Microsoft, who still has an $80 billion fortune, despite the dosh he has given away:

    “the highest economic growth decade was the 1960s. Income tax rates were 90%…the idea that there’s some direct connection that all these innovators are on strike because tax rates are at 35% on corporations, that’s just such nonsense”.

    Next up, Steve Wozniak, co-founder of Apple (with Steve Jobs), which corporation is one of the more notorious corporate tax avoiders (Ireland being complicit in this)

    “I do a lot of work, I do a lot of travel and I pay over 50% of anything I make in taxes and I believe that’s part of life and you should do it…every company in the world should.”

  • Skibo

    Very good article. I was unaware that we were unable to claim back any benefits from jobs created by the introduction of the CT. I thought that was the whole idea of it.
    The treasury seems to have taken away all the lucrative areas that could make the difference and left minimal options. Could they not have offered a 7.5% reduction on all R&D and given a similar benefit with no cost to our overall budget?

  • Ben De Hellenbacque

    It also seems that our elected legislators don’t even know what our skills bases are. If they did then tailoring a taxation system to make up for our skills shortfall would have been a more sensible option than a copy & paste from our out-competing neighbours. Maybe that’s what’s called innovation up here.

  • Kevin Breslin

    Well here’s a worst case scenario thought we can always recruit 26 county staff to come up here.

    Lord knows after trying to deal with the rejections from employers here willpower can be ten times more powerful than skillpower in the job market.

  • Kevin Breslin

    Our R&D tax credit uptake is ridiculously low, likewise our takedown of EU Framework money, UK Research funds, Innovation Vouchers, and use of North-South KTPs …. pretty much there are massive opportunities in Research going to pot.

  • murdockp

    Agree with much of the commentary however

    (1) many businesses who have had to pick up work overseas to survive such as construction companies who have 75% staff working over seas such as London will not qualify. The irony seems to be lost on the politicians either that or they are oblivious.

    (2) ROI has an industrial building allowances regime and capital allowances given over 8 years whilst we have no IBA regime and capital allowances can take up to 20 years to claim

    (3) global companies can remit what profits they like to ROI literally in the billions, in NI it is just the profits from trading here. I.e. pennies.

    (4) tesco now pays more in business rates than corporation tax in the UK and business rates can be half of the NI levels in the rest of the uk

    As I see it an economy is built from the bottom up not the top down. Ct reform is top down policy.

    We need reforms to promote SME activity and that means focusing on planning, business rates, energy costs, transport costs and red tape.

    CT reform is just good PR for politicians to strike a cord with the general public but when you read the detail it is bullshit policy.

    It will deliver little and once our politicians realise this we are another 15 years behind ROI and Isreal.

  • murdockp

    The treasury did not, it is just our halfwits refused to adopt what they are doing in the UK with thier reforms. Planning reform any one? An enterprise zone anyone?

  • murdockp

    Considering from 2017 in England any SME with an NAV of less than 12k will pay Nil in business rates whilst the NI equivalent business will pay £ 6-7k we have a massive burden to carry here.

    Lunacy policy.

  • murdockp

    Newry does not even have 100% fibre broadband in its city centre. We literally are clueless.

  • murdockp

    Sdlp manifesto is silent on business rates reform as is SF, DUP and UUp.

    This is the tax that needs reform not corporation tax. Take a look any our vacant high streets.

    Killed by high business rates.

  • jm

    I can confirm that superfast broadband does not exist in parts of BT1 either!

  • Skibo

    “As might be expected, the energy, continental shelf exploration (ie drilling for oil and gas) and financial services industries are excluded from the reduced rate – an obvious provision to prevent the City of London from relocating to the Titanic Quarter.”
    Murdock who insisted on this? Think you will find the negotiations were held with the treasury.
    We have a certain amount of planning reform here already with it now in the hands of the councils.
    The first enterprise zone is to be located at Coleraine. Hopefully the first of many.

  • Skibo

    Is the take-down of EU Framework a devolved matter? I would have assumed Westminster would have held onto it to maximise their refund agreed by Maggie.

  • New Yorker

    Instead of FDI emphasis should be put on developing indigenous companies that provide good quality jobs. A good example is First Derivatives of Newry. First Derivatives followed a formula that could be replicated in software or other high tech areas. But I have not heard a thing from the politicians about helping to develop similar good companies.

  • Brendan Heading

    Brendan, you chickened out when you say the “legislation is completely impenetrable to anything but a tax lawyer”.

    No Kevin, I didn’t. I said that the legislation “is mostly impenetrable to anyone without a background in tax law“. (emphasis added)

    I said this because the legislation is highly technical and uses a lot of legal and accountancy terms, as well as concepts which would require familiarity with the HMRC tax code. It is ~90 pages long, and the majority of it amends existing legislation (namely the Corporation Tax Act 2009) which means that you can’t properly understand it unless you are familiar with that Act.

    This blog’s length alone probably is longer than two sections of the legislation.

    The Corporation Tax (Northern Ireland) act 2015 comes in at about 90 pages and 30,400 words.

    My article is 5 pages 2253 words.

    Does your use of the word “probably” mean that you are criticizing my research without having stopped to check any of the facts ?

    2 hours you could probably read the whole thing without a taxation qualification, or a headache.

    Very well Kevin. I’ve attached, below, an exerpt from the Act. Please take as long as you like and explain what exactly it means.

    If you cannot explain what it means, I think I deserve an apology – not only for your misrepresentation of my article, but for your suggestion that I “chickened out”.

    357SB Northern Ireland supplementary deduction

    (1)This section applies where—

    (a)a company is entitled under section 1216CF of CTA 2009 to an additional deduction in calculating the profit or loss of the separate programme trade in an accounting period,

    (b)the company is a Northern Ireland company in the period,

    (c)the additional deduction is wholly or partly a Northern Ireland additional deduction, and

    (d)any of the following conditions is met—

    (i)the company does not have a surrenderable loss in the accounting period;

    (ii)the company has a surrenderable loss in the accounting period, but does not make a claim under section 1216CH of CTA 2009 (television tax credit claimable if company has surrenderable loss) for the period;

    (iii)the company has a surrenderable loss in the accounting period and makes a claim under that section for the period, but the amount of Northern Ireland losses surrendered on the claim is less than the Northern Ireland additional deduction.

    (2)The company is entitled to make another deduction (“a Northern Ireland supplementary deduction”) in respect of qualifying expenditure.

    (3)See section 357SC for provision about the amount of the Northern Ireland supplementary deduction.

    (4)The Northern Ireland supplementary deduction—

    (a)is made in calculating the profit or loss of the separate programme trade, and

    (b)forms part of the Northern Ireland profits or Northern Ireland losses of the separate programme trade.

    (5)In this section “surrenderable loss” has the meaning given by section 1216CH of CTA 2009.

    Over to you Kevin. Tell me what that means.

  • Brendan Heading

    I really appreciate your kind comments. I’m not from a business or finance background so it’s good to know I got the broad thrust right in terms of the concerns.

    I like to give the government the benefit of the doubt – surely they know how the tax change is going to lead to benefits ? – but if they’ve worked this out they haven’t explained it.

  • Brendan Heading

    That’s exactly the problem – where will they get the shortfall ? They haven’t told us yet. They’re hoping that we don’t notice.

  • Brendan Heading


    I suspect we agree mostly on this, but developing a non-trivial software product often requires a lot more than a laptop/pc. Developing things like apps for phones, or desktop applications, is usually straightforward. But anything that needs to scale, or requires specialised and/or powerful hardware, requires capital investment.

  • Brendan Heading

    I think it goes even beyond having good infrastructure such as office space and transportation.

    It goes all the way up to stabilizing politics and solving real problems – the really sensitive and difficult ones that they keep trying to dodge. The reason for this is simple – we need immigration – not necessarily from overseas, but at least from other parts of the UK and Ireland.

    The stark reality is that we still have a problem where people turn on their televisions and see more riots or disturbances; or politicians being really nasty to each other. They see that and they form the view that they wouldn’t move over here if we paid them. That’s killing us as much as the failure to invest in education and skills.

  • Brendan Heading

    the “benefit” is supposed to be that the jobs are created in the first place. The Treasury will cash in on the boost to income tax, VAT and so on.

    I’m not surprised that the Treasury locked out the big sectors. There is no way the UK could tolerate a situation where the City of London moved to Belfast for lower corporation tax. We can’t expect huge concessions like that within the UK.

  • Brendan Heading

    Thanks for the kind feedback. You are more than welcome to pinch any part you like. I’m hoping, in a small way, to try to stir up the debate around corporation tax a little more. There is a health warning though – I’m not a tax or accounting expert, so if you are quoting the article somewhere you might want to cross-check my facts.

    Yes I agree that corporation tax devolution was a consensus idea a while ago, and I think Alliance probably made favourable noises about it too. But the Conservatives have built a sting into the tail, and to be honest, I can’t say I blame them.

    Regarding the general idea, I think corporation tax is certainly part of the reason for the overall economic success in the south, and there are ways in which it could well help us here. The thing is that in Ireland it’s part of an overall economic strategy that has continued more or less unmodified since the Haughey years. The Government made an overarching strategic decision to shift the tax burden away from corporations and towards incomes and regressive taxes in the hope of attracting investment. Up here, it’s “cut corporation tax, then sit back and wait for the magic” which is rubbish. Had the Executive negotiated the devolution of income tax and VAT we might be in a different situation.

    I think Gates’ point is well made, although I’d point out that the Woz is a gentleman to whom greed is a foreign concept; he never had any time for or interest in money. Jobs was the man at the business end and the one who accumulated untold wealth and shareholder value. I understand that Apple is keeping huge volumes of its cash reserves offshore in order to avoid US corporation tax – nothing to do with the Woz, of course.

  • Brendan Heading

    This is the kind of devil in the detail that is not well understood by the public.

    For local construction firms with staff overseas, I’m actually not sure how that would work. If they are being paid within Northern Ireland (ie the staff member’s tax office and home address is in Northern Ireland) I would have thought that this would count as “qualifying profit” but the complexity means that such firms would need to hire an accountant familiar with the law to ensure they get the benefit.

    On global companies remitting profits to the RoI in the billions – that is brass plating, and is really tax avoidance. I’m not sure that this is particularly beneficial, or that it has much of a future.

    But the points about business rates are well made.

  • murdockp

    Note the Coleraine ez is called a pilot but that have been round for years in the UK.

  • Graham Parsons

    No, I’m afraid you are wrong. Scaling issues can be easily addressed by cloud computing. Many successful IT businesses were started at home.

    We need to hugely skill up our workforce in STEM subjects and this won’t be done by charging for University courses or cutting allowances and support for young adults who want to continue their studies.

  • murdockp


    The legislation refers to 75% working time not residency which is a big problem for the likes of the construction companies, specialist contractors etc even long distance hauliers.

    Take NIs largest plc, first derivatives over 75% of staff are seconder round the world. Is it fair they are excluded from 12.5% CT rate?

    Agreed on the brass plating point, however it is real it is happening in ROI. My point to the politicians is don’t call 12.5% corporation tax in NI parity with the south. It is like comparing apples with bananas.

  • Brendan Heading

    I agree Graham that using grid computing services (as we called them a while back) are a way to quickly and cheaply scale, and that’s something that we’ve never had before, but they don’t suit all uses cases. A lot of them, sure, but not all. There are issues with privacy, and of course a computer which is remote is no good to you if you are developing hardware or working on something that needs hardware close by. Others need specialised hardware. A lot of the financial services, for example, are still mainframe-based. There’s still a heavily prevalance in telecoms of Solaris on SPARC.

    Another example I can think of off the top of my head is a build server building a product which is the size of a DVD ISO image (7GB or so). It would take only a few seconds to copy that across a gigabit LAN. Longer and more expensive to download it from a build server in the cloud. Now imagine several of your staff downloading it at once ..

    I also agree that we need to think differently about university degrees. The prevailing view lately within the UK has been that paying for tuition is some kind of gift to the student, when it is in fact a downpayment that will return many times over to the taxpayer in the future. UK policy on this is incredibly short sighted.

  • Kevin Breslin

    The only jargon terms I see is “surrenderable loss” but number 5 shows you where to find out what that term means, and separate programme trade defined in 1 (a) which also cross references the CTA 2009 legislation.

    The paragraph highlights the eligibility criteria for the “Northern Ireland supplement deduction” based on the level of their profit margins including disqualifications of these claims on the basis that the company has benefited from tax deductions and write offs in other areas.

    A little patience goes a long way.

  • Kevin Breslin

    Nope, businesses apply for the funds directly from the EU. Northern Ireland businesses lag behind England, Scotland and the Republic of Ireland in their claimant rates.

    Rebate was for the Common Agricultural Policy payments, the UK has one of the main nations who negotiated that the next round of funding emphasis more on research subsidies … Guess what? Yip, not benefiting from them either. English farmers are, Scottish farmers are, Irish farmers in the South are.

  • murdockp

    Our own children returning home should be a priority.

    No income tax for two years for returning emigrants under 30 who have been a away greater than five years is the sort of incentive we need.

  • Brendan Heading

    I picked out four additional technical terms that are unexplained :

    “television tax credit”
    “separate programme trade”
    “qualifying expenditure”
    “Northern Ireland supplement deduction”

    And yes, I know you can go and figure them out by looking them up in the referred legislation (there are many pieces of legislation referred to in the Act). This takes time, and requires background to properly understand.

    Also, this paragraph that you wrote :

    The paragraph highlights the eligibility criteria for the “Northern Ireland supplement deduction” based on the level of their profit margins including disqualifications of these claims on the basis that the company has benefited from tax deductions and write offs in other areas.

    This account makes little sense to me, as someone with no background in accounting or tax law. What “write offs” ? What “other areas” ?

  • murdockp

    Given that PwC et al charge £1,500 per hour for a partner to guide you through this legislation, it is reasonable to assume this is pretty complex law.

    And it is. I am ex big 4 corporation tax and it is not straightforward.

  • Kevin Breslin

    Very simply you cannot claim the television tax credit under a surrendable loss and claim the deduction, and you cannot get the supplement deduction if your surrendable losses are higher than that deduction.

    Not impenetrable, not that difficult to understand.

  • murdockp

    They have had to weave anti avoidance legislation to stop indigenous UK companies moving profits into and losses away from NI.

    Difficult legislation to draft.

  • Brendan Heading


    reading the words and quoting them back to me is not the same as understanding what they mean and what their consequences are.

  • Skibo

    I don’t think you are right on this one. The government has to draw down the money. They have to get groups to participate. This does not just include SMEs but community groups also. The north are not too far behind in RTD coming seventh in the UK regions, 0.25% behind the average for UK but a whole .5% for the whole of the EU.
    I believe we have a problem in this country where we love to rubbish everything the government does. There are plenty of positive stories but they don’t make the news.

  • Skibo

    Yes they have been around since the 1980s but there have been drawbacks. The fact of setting up EZs does nothing about increasing the viability of the area to support the industry on a long term basis. Problem being as the assistance of the EZs is phased out, if the issues to the lack of industry has not been rectified, then the business cannot last and will either fail or relocate to the next EZ.
    Another issue is, does EZs create new business or merely facilitate the relocation of existing business.
    The west of the Bann has major problems with connectivity and internet access.
    Perhaps with the upgrading of the A5 and A6, one of these issues will be resolved along with diversions round Magherafelt, Cookstown, Dungannon and Dungiven to name a few.
    Internet access is critical to business growth.
    Another major problem for business is the cost of services, particularly electricity.
    I propose an island wide electric business tariff and get the border interconnector issue resolved.
    This may take a buyout of the contract for supply of electric within NI but would be worth the pain.

  • Old Mortality

    Since you mention First Derivatives, why on earth are they based in Newry rather than Dundalk if corporation tax is so important?

  • Skibo

    Its a bit of a bluff to say a two year holiday from income tax will attract people home. Good jobs and a stable economy will attract people willing to pay tax.

  • Old Mortality

    The significant loss from the block grant is the one positive consequence of lowering corporation tax that we can confidently predict.

  • Skibo

    Surely if the employees are registered as dwelling in NI, travelling to work in the UK but main place of residence is NI, then they are resident in NI.
    The profit of the construction company would be declared in NI with all buying and tendering etc happening through their head office.
    Point 2 for Murdockp should also note the removal of business to write off buildings over a four year time span also. A change in the tax law a number of years ago. To reverse it could assist businesses and farms to extend premises increasing the home construction industry.

  • Old Mortality

    Not if they’re coming back to work in the public sector.

  • murdockp

    I agree with all your points, I am no fan of CT reform for the reason our politicians are talking about it as it is the silver bullet. We in business know it is just one of range of measures the business community needs, sadly no others have been mooted by the politicians or political parties
    As for your point on EZ’s I agree the history is patchy but Sunderland got Nissan and Toyota on the back of them and London got canary wharf, However Scotland many of the premises constructed to houses the silicon glen companies are now mothballed.

    The EZ in Coleraine is also a pale imitation of the 1980s zones.
    The big issue for NI manufacturers is business rates, energy costs and transport costs to get goods to market.
    The energy is easy, we have wind and tides in abundance.
    As for transport, shut down Aldergrove and invest £300m in Belfast city and to hell with the neighbours, if they don’t like the noise, pay market value for their houses but we need a world class airport neer the city centre.

    In terms of goods to market, I believe a tunnel is the answer, probably from Dublin to Wales, the Scotland option is pandering to Unionist ancestry, the tunnel needs to get the goods to the midlands, the distribution hub of the UK and our best option of a main link to would cost in the region of £50bn, but if the UK government thinks a similar investment in high speed rail is good value, surely both countries and the EU would both agree a tunnel would be excellent value?
    Just a thought.
    We need big visionary out of the norm solutions.
    Spunking tax payers cash on a GAA stadium is not investing in infrastructure.

  • murdockp

    good point

  • murdockp

    I was away for 20 years, what took me back was having a child, there was many times I was close to coming back but wavered. I often think what practical measures would be the nudge I needed to return. I think a tax holiday would have been a good nudge.
    It is no different to the deals the rest of the world are offering to attract British and Irish doctors and nurses.

  • murdockp

    yet in the deepest countryside, fibre is everywhere, because there are no votes to be had from the business districts of NI.

  • Skibo

    I was away for 8 years. We had children in primary school and just one day my wife and I were talking and I said in passing maybe we should go home and that was all the nudge we needed. She couldn’t get home soon enough. I had to stay behind and sort out the house etc.

  • murdockp

    Brian Conlon who started FD is equal to the visionaries of Silicon Valley in the US. Imagine what he would have achieved if it located in a country that gave a Damn, even now Newry Mourne and Down council are making life difficult for FD’s planning application for new head office rather than just accelerating its passage through or even removing the need for planning like happens in Australia for tech.
    The red tape needs to be cut.

  • murdockp

    There are many of us, you have touched a great topic here.
    It is a taboo subject in NI, personally my view is the more who come home, the more liberal and tolerant we will become as a society.
    The knock on affect will be the less power the politicians will have as returning emigrants who have seen a bit of the world tend to take what our politicians say with a pinch of salt.
    I would love to see data as to numbers who have left over the last 20 years and how they have fared socially, economically and with their employment and skillset profiled.
    We need to get a handle on the people we are losing, the skills they have and the cost to our economy and society firstly due to their loss and secondly their economic value if they returned.

  • Skibo

    It is amazing when we sit down and try to resolve issues, how close solutions can be. I do not agree with your comment on the Airport though. Aldergrove is situated well to serve most of NI. It need a rail connection though. Belfast city airport will always be restricted by the length of the runway and the size of the planes. Ever seen the giant Russian plane at Aldergrove. Now thats a plane.
    I have commented previously on a tunnel ling from Dublin to Wales. It is the most financially viable option.
    EZs I believe started in Ireland with the Shannon Airport. Was it not the baby of Charlie Haughey?
    The British scorned the idea but eventually came round to adopt a similar system.

  • murdockp

    Don’t disagree, but this assumes all people should be employed.
    We need entrepreneurs to return to start businesses too and we need something different, something practical, a game changer.

  • Skibo

    I agree, but I left NI with the impression that I was British/ Irish and lived in England for eight years to find out that I was actually Irish and shouldn’t have been ashamed of it. I have a serious intolerance of intolerance if that makes sense. I can accept that my neighbours like to get the bass drum and flutes out and get dressed up. I don’t feel offended but I like to feel appreciated and not have my tolerance of their rights taken for granted.
    I see a future where we will all find a comfort in a reunited Ireland where all cultures can be mutually accepted.
    We must look at converging policies across the island in preparation for such a day.

  • murdockp

    Forgot to say the planning reform has made things worse. An independent review of the new planning service by a leading Scottish planner stated that many of the new departments are not fit for purpose. Newry Mourne and Down is a nightmare.
    It is the same people working in different buildings with different business cards and new e mail addresses. That is what reform is in NI, a rebrand, kicking the can down the road.
    How can you reform something if you don’t change the people?

  • murdockp

    I fly to London bi weekly and have done for eight years. I avoid both Belfast’s like the plague for different reasons.
    There is only one world class airport on the Island of Ireland, Dublin, and it is world class, it really is.

  • murdockp

    I never said CT was important, quite the opposite it is a red herring, meaningless. Would you locate a business in NI to save £50k per £1m of profit?

    I wouldn’t.

    The CEO and founder for FD is from and lives in Newry, it is there for no other reason, but being equal distant from two airports helps too I guess.

  • Skibo

    A holiday from employers liability for two years as long as the post continues for a further five years may be a more practical solution. It reduces the cost of producing the job while still expecting the employee to contribute to society.
    I have a few more policies that I think would help Health and policing also.
    I would propose the construction of Drunk Tanks in all large towns. If found drunk and disorderly on the street, you would spend the night in the tank and it would cost £100 to get out in the morning. Any medical assistance would be carried out there as an emergency only.
    I would gear Health from the ground up lead by GPs. They would have to be available 24/7. Access to A&E would be at GP discretion or by ambulance via a paramedic. We are tying A&E up with general cases that generally have no need to be there, that and drunks.
    I would reorganise the hospitals and rationalise them to specialise in specific areas of health.

  • murdockp

    That would mean that SF would have to change policy to culling £2,000 per capita from their budget and halving the size of the civil service to align themselves with ROI, this will never happen with them at the controls.

  • Skibo

    But the planning is now closer to the people. It is in its infancy and it will probably take a couple of council elections to bed the new system in.

  • murdockp

    No, the system is beyond repair, it really is.

  • Skibo

    I agree and I believe they are about to push for a second runway. Success breeds success.
    We in the West are at least 2 hours at high chase speeds from Dublin. We can make Aldergrove in half an hour and not much more for City.

  • jm

    I don’t see how this will suddenly make our private sector flourish. It just means less money in the block grant and as usual it will be the poor who suffer the consequences.
    I would love slugger to do a blog in praise of universal income, just to see your comments 🙂

  • Skibo

    I don’t agree but as it has been a while since I had to get involved, you may have more history than I. I find in the countryside, the planners are still trying to force people into towns where they don’t particularly want to be. It is interesting to look at historical maps of housing within the countryside over a hundred years ago and see how many were actually living there.

  • murdockp

    Say Invest NI has a 500 acre site for industry. Why the need for planning at all? In Australia it is not a requirement as it is in place from start all you have to do is make sure it is of a certain height, colour and materials and that’s it. Done.
    Here planning s water torture, it can take years. This is a reality. I now know business who want to extend premises who are now just building without planning as they can’t wait any longer and are taking the view that they are creating jobs so it will be a pretty stupid move to stop them.
    The John Lewis Store in Belfast / Sprucefield is a case study in planning incompetence.

  • Skibo

    Well it is happening. The block grant is reducing year on year without SF lifting a finger and they have approved the borrowing of money to assist in the reduction of the civil service. If you think this imbalance has only happened during the time of the troubles then think again. During the thirties the UK had to bankroll the NI government. For an area that prior to partition had a GDP per capita greater than the UK to now one about half of that of the UK, something serious has gone wrong.
    The south needs to look at the benefits of the NHS or maybe we need to have a real look at their health service, maybe the NHS is not the panacea everyone thinks it is

  • Skibo

    I think EZs should have a reduced planning requirement but health and safety should always be a concern.
    The John Lewis store is another story altogether. It was more about Belfast not wanting a retail hub outside their control but within commuter distance. Retail parks though are destroying the city centre footfall.

  • Kevin Breslin

    I claimed tax credits without a bloody accountancy degree, you honestly think that claiming tax credits for creating a television program is rocket neuroscience in Japanese!

    Stop encouraging cowardice!

  • New Yorker

    Brian Conlon is a very talented man. I did not know about their planning problems. Newry Mourne and Down is a useless council. I submitted plans to them and it took a year to get approval for a residential extension. I agree there has to be a total personnel change of the council. The last big idea I heard they had was to put ski lifts in Newcastle. That’s not a joke. You can walk or motor up to the Mournes but they think ski lifts would be a good addition despite there is no need at it would mar the landscape. I think the NMD council is nothing more than a job scheme for people otherwise unemployable.

  • jm

    Don’t ya just hate those doctors and nurses and dentists and teachers etc etc

  • Kevin Breslin

    I’m not rubbishing the government, because the government doesn’t put companies in bibs and say open your mouth here comes the big R&D tax credit airplane. How is it the government’s fault for example if they issue tax credits and no one takes them up?

    How did I blame the government?

    The UK claims more Science money from the EU than Germany does, that’s because companies and universities make more successful claims.
    Germany’s main advantage is in the Applied Sciences and Engineering.
    That also proves that nation states aren’t the primary deciders of access to these funds.

    The British government does do a lot of stupid things, but I don’t hold them at fault for low claimant rate of R&D support.

    The funds have to be applied for, and Northern Ireland doesn’t have a historically good record at getting this support.

    Yes, R & D spend has caught up with UK levels, still lower than ROI levels, but the use of company’s own money. Lower corporation tax may increase the viability of companies having more R&D output, even if no new corporations are brought in.

    It seems that researchers here are more unlikely to try to penetrate any bureaucracy for a tax break. In more austere times, the credit route is a more sensible way for governments to issue funding than subsidy and subvention.

    Tax credits, Innovation vouchers, Funding grants … tend to be ignored.

    People on welfare are probably better at filling out forms.

    Also Horizon 2020 funding uptake is below UK levels, mainly because we don’t have industries that can benefit from those yet e.g. local industries who can use nanotechnology, or brain science research, it’s probably due to universities and partners outside Northern Ireland that this region is entitled to anything from this.

  • Kevin Breslin

    There is one in Coleraine near the university… it has one company taking advantage of it.

  • NMS

    The role of Irish CT policy as part of a broader Industrial policy has a long history, going back over 60 years. It has developed considerably over that period from the initial TK Whitaker proposals & those which came from the First Review (Commission) on taxation. The problem is very much the failure to build on that. While the tax relief system has become more nuanced, the other side of the policy, direct investment, has gradually disappeared.

    Unfortunately, a large part of State involvement in Industrial development and in Research & Development in particular comes via the tax system. For example, in 2011, total R & D support was €379M, of which €261M came via the tax system with just €118M via Direct Grants (source D.of Finance). Because around 80% of the R&D tax relief accrues to MNCs, well over 50% of all of the spend goes to a handful of MNCs. Opting to for a tax based system of investment also prevents the State choosing the areas of investment – effectively you grant relief on those areas of interest to to MNCs & which they are willing to locate in Ireland.

    The other part of the problem is that much of the R&D spend is in the area of “process R&D” rather than in pure research.

    The cost of the R&D tax system has gone from €258M in 2011 to €418M in 2013 (source Revenue Commrs).

    I cannot agree with you more around the failure to invest in 3rd & 4th Level Education. The need to spend far more is urgent. The failure to tackle the ratio of the spend which will come from the State and from fees is consistently fudged. In the case of NI, the poor standard of much of its second level education system, outside of the Catholic grammars, is surely a more pressing issue than cutting taxes. The Provo leader apparent John O’Dowd has of course delivered further cuts in the area.

    In relation to infrastructure investment, an FDI dependent model will never work in Northern Ireland, other than to provide lower paid work. MNCs cluster together in major centres with easy access to the Rest of the World. Regional cities are at an automatic disadvantage. Almost all new investment in Ireland now goes to Dublin. Even reasonably well connected locations like Cork struggle to get new projects. The former German territories of Western Poland such as Wroclaw/Breslau are exceptions. But even there, low pay is one of the attractions. If Cork, with a long history of FDI struggles, how will Belfast let alone L’derry do.

    Investment, employment etc., are driven by far more than taxation. Access issues, skilled prospective employees etc. are far more important and without them, a location will not even be considered. Can your Italian employees get home to see Mamma or Nonna – 7 flights per day to Milan make it accessible!

    For example, I remember being at a meeting nearly ten years ago with a large MNC, who were considering locating in Ireland. It ticked all the boxes & now they were checking out the tax system and a hastily arranged presentation was organised. Why would a Facebook locate in Belfast over Dublin? Exciting night life??

  • whatif1984true

    If an economy is still heavily agricultural based with an overwhelmingly ‘small’ business economy tied to an over sized public sector, would only idiots propose changing Corporation tax. Would anyone like to guess over the next 15 years how many new jobs will come from lowering Corporation tax and how many will be created by small businesses.
    Can anyone give some measure of how probable those guesses will actually be correct.

  • Brendan Heading

    I claimed tax credits without a bloody accountancy degree, you honestly think that claiming tax credits for creating a television program is rocket neuroscience in Japanese!

    Given that you have no background in accounting or tax, how do you know what the process for claiming tax credits for television production involves ? How do you know it has any relationship to personal tax credits ?

    Stop encouraging cowardice!

    Kevin, on exactly what planet is it cowardice to point out that a background in tax law is required to properly understand amendments to corporation tax ?

    You clearly don’t understand the law or what it means; you haven’t written your own article on the subject which does a better job than mine does – haven’t you got anything better to do than sit there and shout abuse at me ?

  • Kevin Breslin

    I am not a fan of your can’t do spirit.

    My main problem was that you were inferring you need professional knowledge to have any knowledge and professionals have all the knowledge.

    What I failed to mention was when I was claiming working tax credits I got no assistance from the company accountant of the firm I was at.

    The next company I worked at the manager did his own accountancy.

  • Kevin Breslin

    It’s cowardice to have such a can’t do attitude. That attitude is abusive, and if someone called me a coward for having no willingness to learn I would thank them.

    I accept accountants and tax lawyers exist for a purpose, I will not accept that their job is to segregate us from being able to read any document with accountancy lingo on it. I don’t believe you need to be a scientist to understand science or an accountant to understand accountancy or a lawyer to understand the law.

    With that type of attitude only doctors and nurses could practice first aid, it’s our duty to accept you need to have their knowledge of anatomy and physiology to treat anything.

    It’s that type of attitude that says people cannot run small businesses or household budgets without some financial expert, accountant or actuary hanging over their shoulder.

    People who aren’t accountants aren’t superhuman, they learn this stuff … It’s not some genetic trait from a specialist blood line, it comes from hard work and effort.

    This legislation was drafted by civil servants, who made them accountants?

    I’m not an accountant, but I’d guesstimate the accountancy here is routine rather than specialist.

    It’s that can’t do attitude that keeps people from learning the maths they need to do a psychology degree because it projects the sort of pessimism that a moment’s disinterest must mean you distance yourself entirely.

    When I was struggling to find jobs, pretty over qualified I didn’t stop educating myself or trying to scare people away from enquiry or curiosity in something.

    Education is not the filling of a pail it is the lighting of a fire.

    Of course people are not going to understand any topic if they are unwilling to try, and a large reason why people don’t try are these false dogmas and stereotypes that professionals should be forced to know everything and amateurs should be forced to know nothing.

    The Them and Us of intellectual snobbery.

  • Tochais Siorai

    And cheaper labour costs must be a factor too.

  • John Collins

    An elderly couple in the South on the OAP would immediately drop at least £120 a week, or over £6,000 a year, and people on Social Welfare benefits would also encounter a substantial drop if they were to ‘look at the benefits of the NHS’.

  • Skibo

    Or an elderly couple in the north would increase by £120 a week.

  • John Collins

    But of course.