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Corporation Tax (Northern Ireland) Act 2015

Chapter 4

21.Chapter 4 sets out the basic definitions which apply for the purposes of Part 8B. A company will be a Northern Ireland company if it carries on a qualifying trade and meets either the SME condition at section 357KA(2) or the large company condition at section 357KA(3).

22.Section 357KB provides that a trade carried on by a company (other than in a partnership) will be a qualifying trade if the company is within the charge to corporation tax in relation to that trade and the trade is not an excluded trade.

23.The definition of “qualifying trade” includes provision enabling a company to make a one-off election under section 357KB to bring in profits attributable to the back-office functions of certain trades which would otherwise be excluded trades. Chapter 17 defines the meaning of an excluded trade and includes the power to define the meaning of back-office activities.

24.The SME condition is met if a company is an SME as defined at section 357KC and is a Northern Ireland employer. It will be a Northern Ireland employer if the Northern Ireland workforce conditions set out at section 357KE are met in relation to the relevant accounting period, or in relation to the period of 12 months preceding that accounting period.

25.The Northern Ireland workforce conditions are met if at least 75% of a company’s UK staff time and costs relate to work carried out in Northern Ireland. If this test is not met then the company is not a Northern Ireland employer, it will not meet the SME condition and all of its trading profits will be chargeable at the UK main rate of corporation tax.

26.Section 357KE(8) provides a regulation-making power for HMRC to specify descriptions of deductions which are, or are not, to be regarded as workforce expenses.

27.The large company condition is met if the company is not an SME and has a Northern Ireland regional establishment (NIRE) which is defined in Chapter 5.

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