Autumn Budget 2017 - Technology issues

Here we look at issues within the Chancellor’s announcements in this year’s Autumn Budget affecting technology.

The announcements of the Autumn Budget affirm the government’s plan to transform Britain into the global go-to place for scientists, innovators and tech investors, and hope to counteract the loss of EU funding for university research that has already started.

R&D tax credit

The government announced an increase to the RDEC rate from 11% to 12% on qualifying expenditure incurred on or after 1 January 2018. This increase will be great news for larger companies and in some cases even some SME’s that may fall into the RDEC regime. The SME relief which provides companies with an enhanced deduction on qualifying expenditure against taxable profits has remained at 230%. Given that the SME relief is currently at its maximum level due to EU state aid rules, there was no surprise that this relief remained unchanged. However, as the UK is expected to leave the EU, there is space for the SME scheme regime to grow in the future. Whilst there was not a huge increase to the R&D tax credits regime, it highlights the government’s commitment to R&D tax relief.

Patent box

The patent box regime did not even get a mention in the Autumn budget. First introduced in April 2013 and then amended in the Finance Act 2016, patent box effectively offers Britain’s entrepreneurs a reduced corporation tax on the income they received from their patents.

Targeted EIS investment

The Enterprise Investment Schemes (EIS) and Venture Capital Trusts (VCTs) received a boost in the Autumn Budget. The government have encouraged investment in knowledge-intensive companies by doubling the limit on the amount an individual may invest under the EIS in a tax year from £1 million to £2 million, provided any amount over £1 million is invested in one or more knowledge-intensive companies. From 6 April 2018 an individual investor will now be able to earn up to £600,000 in tax relief, up from £300,000 in the current tax year. Investors earn 30 per cent tax relief on investments in EIS as an incentive to drive funds towards higher-risk companies. The annual investment limit of knowledge-intensive companies receiving investments under the EIS and from VCTs has also doubled from the current limit of £5 million to £10 million, the lifetime limit will remain the same at £20 million.

Withholding tax on royalties

The government is cracking down on tax avoidance by large multi-nationals and are taking steps to increase the tax it collects from these companies. From April 2019 a new withholding tax will be applied on royalty payments made to low or no tax jurisdictions in connection with sales to UK customers. The rules will apply regardless of where the payer is located. A consultation on this will be published on 1 December 2017 outlining the design of the rules with the legislation being introduced in the Finance Bill 2018-19 and the changes having effect from April 2019.

All of the above may seem like small steps towards Britain’s mission of becoming the centre for technology, however it does pave the way for science and innovation to drive an economy fit for the future.

To discuss the changes resulting from this year's Autumn Budget, please do not hesitate to contact us.