One Born Every Half-Hour: Where the Budget Leaves the Tech Sector
Here below MHA MacIntyre Hudson Partner, Jason Mitchell outlines the impact of the Autumn Budget for the UK’s tech sector.
Philip Hammond says a new UK high-tech business is founded every hour. He wants this changed to one every half hour in an attempt to lift the gloom over the country’s prime growth sector and support jobs of the future.
To achieve a new dawn for tech start-ups, there first needs to be an environment conducive to growth. The tech sector is reliant on access to the right talent and this has proved a real bottleneck over the past five years.
I welcome the chancellor’s vision to create skills through the biggest increase in science and innovation funding in schools for decades. There will be a training fund for maths teachers, a £600 "maths premium" for schools linked to the number of pupils taking the subject, and proposals for new maths schools. It was also positive to hear the promise of increased funding of innovation in universities, including commitment to replace European funding if necessary.
Today’s workforce also needs to be reskilled. There was mention of a new National Centre for Computing & initiatives for digital skills retraining, which clearly harks back to recommendations put forward by techUK.
The government also needed to help finance growth. It plans to unlock over £20 billion of patient capital investment to finance growth in innovative firms over 10 years through a new £2.5bn investment fund. This doubles the annual allowance for people investing in knowledge-intensive companies through Enterprise Investment Schemes (EIS) and backing overseas investment in UK venture capital through the Department for International Trade.
The planned increase in research and development expenditure credits (“RDEC”) for large companies is also great. Mr Hammond has promised to allocate a further £2.3 billion for investment in R&D and will increase RDEC from 11% to 12%. The next step, it appears, is to make everyone aware of it! Many companies currently miss out on the scheme.
He’s also proposing to introduce measures in 2019 to apply withholding tax on royalties and similar payments to “low tax jurisdictions”. It will be interesting to see these proposals set out in detail and how they will interact with existing double tax treaties. This will have a significant impact on cross border tax structuring even where significant substance, activity and risk is undertaken to support such payments from a transfer pricing perspective.
The world is "on the brink of a technological revolution" exclaimed Mr Hammond, and the UK needs to be at the forefront.