A Memorandum of Understanding on the Northern Ireland Corporation Tax (NICT) was published by HMRC and the Department of Finance and Personnel for Northern Ireland (DFPNI) on 7 January 2016.

The transfer to the Northern Ireland Assembly of the power to set its own corporation tax rate is dependent on the ability of the Northern Ireland Executive to show that it has implemented measures to put its finances on a sustainable footing. When the appropriate reforms are implemented the Assembly will have the power to set the rate of NICT each year.

A Project Board has been appointed to meet oversee the implementation of the project. The Northern Ireland Assembly (NIA) will be responsible for setting the rate of corporation tax in Northern Ireland but will not be responsible for any other aspect of the tax which will still be administered by HMRC. The arrangement provides for the Northern Ireland Executive budget to bear the cost of setting up and operation NICT and to receive the tax revenue collected.

Companies that must pay the NICT will be identified by HMRC from the information in its systems. Larger companies must pay NICT on their qualifying trading profits if they have a permanent place of business or an agent acting on their behalf in Northern Ireland. The profits to be charged at the NICT rate must be allocated based on international principles.

Small and medium enterprises (SMEs) with at least 75% of their employment costs and time arising in Northern Ireland are to pay NICT on all their UK trading profits except for profits arising from excluded trades or activities.

A new supplementary page is to be added to the UK corporation tax return CT600 to administer the NICT regime. Companies will indicate on the return the amount of corporation tax payable at the NICT rate and the filing process will otherwise be the same as the existing return process. The NICT rate will be set by the NIA prior to the commencement of the Financial Year to which the rate applies. If no rate is set the rate will default to the main UK corporation tax rate.