Could Northern Ireland have a lower Corporation Tax rate than the rest of the UK?

Full answer

Corporation Tax devolution to Northern Ireland has a long, so-far unrealised history, driven largely by the competitive pressure of sharing a land border with the Republic of Ireland, which has historically maintained a much lower headline Corporation Tax rate to attract foreign investment. The Corporation Tax (Northern Ireland) Act 2015 gave the Northern Ireland Assembly the legal power, subject to certain conditions being met (including confidence that Northern Ireland's public finances could sustainably absorb the resulting reduction in Corporation Tax revenue, since a lower Northern Ireland rate would mean a corresponding reduction in the block grant funding it receives from the UK Government), to set its own, potentially much lower, Corporation Tax rate specifically on trading profits, distinct from the rate applying in the rest of the UK. However, this devolved power has never actually been commenced or brought into practical effect, partly due to the political instability and periods of suspension affecting the Northern Ireland Assembly and Executive since the legislation passed, and partly due to the fiscal conditions required before commencement being difficult to satisfy. As a result, businesses trading in Northern Ireland currently pay exactly the same UK-wide Corporation Tax rates -- the 19% small profits rate and 25% main rate, with marginal relief in between -- as businesses anywhere else in the UK, with no Northern Ireland-specific reduced rate currently in effect, despite the legal framework to introduce one having existed since 2015. Any future activation of this power would require a specific decision and announcement from the Northern Ireland Executive and UK Government, so businesses should not currently plan around a lower Northern Ireland rate materialising without such a confirmed announcement.