Northern Ireland corporation tax: Supporters optimistic

Sources told the BBC that HM Revenue and Customs have almost completed detailed technical work on corporation tax for Northern Ireland

Supporters of the devolution of corporation tax to Northern Ireland have expressed growing optimism that the power will be in place by 2017.

Stormont wants to be able to match the 12.5% tax rate in the Republic of Ireland.

The optimism comes despite an assertion by the Conservative Party in Scotland that corporation tax was "the least suitable of all taxes for devolution".

That conclusion is contained in the party's Scottish devolution commission.

The commission is chaired by Lord Strathclyde, former leader of the House of Lords.

It said that corporation tax was "not economical to collect on a small scale" and "does not generate a reliable yield".

It also asserts that "devolution would be complex in law".

Before parliament

However, the BBC understands that HM Revenue & Customs (HMRC) have almost completed detailed technical work on corporation tax devolution for Northern Ireland.

HMRC is preparing advice for government lawyers who will draft the legislation which can then be brought before parliament before the end of 2014.

The most likely time for an announcement from the Westminster government is around the time of the Chancellor's autumn statement.

That will leave a tight legislative timetable as the UK general election is in May 2015.

Stormont would then have to pass its own legislation to introduce the reduced rate.

Supporters of the proposal are confident that they have the support of the prime minister but have cautioned that there are still some political uncertainties.

Complicating factors

Last year the prime minister 'parked' the decision on corporation tax until after September's Scottish independence referendum.

The referendum outcome that would be most complicated is a 'narrow no' as that could open up a broader debate about devolution of taxation powers across the UK.

Other complicating factors include Stormont's failure to reach agreement on implementing welfare reform and an increasingly tough public spending environment.

European rules mean that Stormont would have to compensate the Treasury for any tax reduction by handing back a portion of its annual budget.

The budget reduction could be as much as £400m per year, which could be a controversial political decision if it comes at a time of spending cuts.

However, supporters believe the economic boost to Northern Ireland from inward investment would outweigh the cost to the public purse.