2015 Spending Review: Impact on Northern Ireland

Key facts for Northern Ireland

Confirmation of reduction of corporation tax rate to 12.5%
£11bn block grant will be available for 2019/20
£600 million investment in infrastructure will bring tangible results in the future

Commenting on the impact of the 2015 Spending Review on Northern Ireland, Jackie Henry, senior partner at Deloitte in Northern Ireland, said:

“The Chancellor appears to have achieved the impossible – easing the squeeze on public spending, dumping cuts to tax credits and sticking to his deficit reduction plans.

“The tax credit announcement is particularly good news to low paid workers in Northern Ireland who will no longer face having their benefits cut in April. The changes would have meant more than 120,000 Northern Ireland households losing over £900 a year on average.”

BUSINESS LEVY
“The major burden will fall on larger businesses in the form of the apprenticeship levy. This is expected to raise £2.7 billion from 2017, increasing annually thereafter.

“Small businesses are effectively exempted from the levy thanks to a £15,000 rebate. This is positive news for Northern Ireland which relies so heavily on businesses in this category. The small business rate relief, which apparently benefits 600,000 small businesses, will be extended for another year, at a cost of £700 million.”

BUY TO LET PROPERTY PURCHASES

“Those purchasing a buy-to-let residential property or a second home may need to pay an additional 3% Stamp Duty Land Tax (SDLT) from 1 April 2016. The additional rate will apply to purchases of additional residential properties costing over £40,000, but excluding caravans, mobile homes and houseboats. This will give a maximum SDLT rate of 15% for properties costing more than £1,500,000.”

INFRASTRUCTURE INVESTMENT

“In particular we welcome the news that Northern Ireland will receive £600 million investment in infrastructure which will bring tangible results in the future. Many local organisations have been calling for this announcement in recent months and it is good to see that call has been answered.”

CORPORATION TAX

“While there was nothing new on corporation tax, the Chancellor confirmed the NI Executive’s commitment that corporation tax in Northern Ireland would be lowered to 12.5 per cent by 2018. The corporation tax reduction is an important development for Northern Ireland’s economic future and it is positive that there is now certainty around when the cut will take place.”

PUBLIC SERVICES

“Today’s Spending Review confirms that the pace of change in public services is set to increase. The public are likely to see much more noticeable changes in their public services in this Parliament than they did in the last. The public sector will need to retain its best people to meet these profound changes. Digital transformation is now so fundamental to the Government’s thinking that is prevalent in every corner of the Spending Review.

“A lot of responsibility for funding services such as social care, councils and police is being pushed down to the local level – a lot of public servants across the country will be scratching their heads today about the combined impact of these changes. In many cases extra funds may be insufficient to deal with the level of challenges public services face.”

 

The Chancellor delivered an Autumn Statement and Spending Review that was full of good news, but very little detail about how they will be funded, says ACCA (the Association of Chartered Certified Accountants).

Chas Roy-Chowdhury, ACCA head of taxation said: “The Chancellor managed to deliver an Autumn Statement that was filled with good news, but given the lack of wiggle-room he has, it is concerning that much of the spending is based on the assumption of consistently strong growth figures, especially given the downgrade in world growth forecasts by the Office for Budget Responsibility.

“The breach of the welfare cap is politically embarrassing, but many believe it was a purely political, rather than economic gesture to introduce the cap in the first place. In the long run it will likely lead to very little economic repercussions, and could even give him cover for even deep welfare cuts in the future.
Tax Credits

The improved public finance figures have dug the Chancellor out of a big hole regarding tax credits, he’s able to wait for them to phased out through the introduction of universal credit. He will be relieved that this avoids another battle with the House of Lords.

Paper tax returns

“This is not simplicity, call it what it is, accelerating payment. Radical reform is needed to support our small businesses who simply want to get out there and get on”.

Tax avoidance

“As expected the Chancellor is expecting the Treasury coffers to be swelled by more anti-avoidance measures. This, alongside public spending cuts, has been the mainstay of his monetary policy; the problem now is that HMRC (Her Majesty’s Revenue and Customs) has just about exhausted the well of easy to reach targets. This past year saw a fall in Corporation Tax collected through anti-avoidance measures; this would imply that they are moving in to areas where collection is more difficult and time consuming.

The new penalties announced under the General Anti-Abuse Rule is a further announcement of tax creep, which is unwelcome.

The failure of the government to get the tax credits cut through the House of Lords has taken away near enough all of the Chancellor’s room for manoeuvre, so relying on the latest anti-avoidance expectation would be dangerous.

 

Responding to the Chancellor’s Autumn Statement earlier today, Ann McGregor, Chief Executive of Northern Ireland Chamber of Commerce and Industry (NI Chamber), said:

“We are delighted that the Chancellor has used this opportunity to listen to business on infrastructure and that Northern Ireland will receive more money to be spent on infrastructure projects as part of today’s announcement.

“Infrastructure is one of biggest issues raised by NI Chamber members who believe that Northern Ireland’s infrastructure is suboptimal. There is a lack of delivery of key projects (e.g. North South Interconnector and the A5) and our road networks are not well maintained.

“Our members have long called for improvements in the strategic road network with a particular focus on addressing bottlenecks, such as the York Street interchange, along with the other projects such as the A5 and the A6. Northern Ireland also needs to Invest in public transport services to enhance connectivity and mobility (including the rail link to Dublin).

“Businesses will also welcome the Regional Air Connectivity Fund to support new air routes promoting domestic and international connectivity including from Belfast to Carlisle and from Derry to Dublin. The maintenance of existing air routes and the introduction of new routes benefit local business people in terms of developing business linkages and improving access to customers and markets outside of Northern Ireland. It therefore has a direct impact upon Northern Ireland’s ability to grow exports and boost investment.

“Finally, NI Chamber also welcomes the government’s reiteration that it is committed to the devolution of Corporation Tax powers to the Northern Ireland Assembly, subject to the Northern Ireland Executive demonstrating that its finances have been put on a sustainable footing and the commitments from the Stormont House Agreement met. We again urge the Northern Ireland Executive to ensure this opportunity is not wasted.”