Treasury defends Ulster U-turn

The government has pleaded that it did its best to secure tax breaks for Northern Ireland despite Accountancy Age revealing last week that ministers had been being forced by Europe into an embarrassing U-turn on capital allowances.

Responding to the severe criticism which followed its withdrawal of 100% first-year capital allowances for many businesses in the province a fortnight ago, the Treasury said: ‘We are satisfied we have secured the best possible deal for small and medium-sized enterprises in Northern Ireland.’

Inland Revenue staff in Northern Ireland are said to be aghast at the shock withdrawal of the allowances aimed at all SMEs, which were announced last May in the lead-up to the Good Friday agreement referendum. But the government was forced to withdraw them for large swathes of the province’s businesses – mainly freight and agriculture – as they were deemed illegal state aid under European Commission rules.

Responding to criticism from angry business representatives in the province last week, the Treasury added: ‘It is an exaggeration to say the measure has been severely restricted. While some sectors of industry will not now be eligible for the measure, they are still entitled to 40% first-year allowances.’

But the Treasury emphasised that it had said that the measure would have to be approved by the EC when it was announced.

See analysis Europe thwarts Northern Ireland tax spin