Philip Hammond’s much predicted ‘End to Austerity’ Budget was a lot more positive than similar pronouncements of recent years. Although UK growth is still sluggish (predicted at 1.6% for 2018), higher than expected tax revenues have enabled the public purse strings to be loosened. Announcements that will be of interest to technology SME’s include:
- New UK digital services tax on revenues of tech giants from 2020. Will only be paid by profitable firms that have at least £500m a year in global revenues.
- Annual Investment Allowance (for eligible CapEx purchases) increased from £200,000 to £1m, for two years.
- Entrepreneurs’ Relief minimum ownership period doubled to two years.
- Measures to tackle abuse of SME R&D Tax Credit claims by loss making companies (refund now capped at 3 x PAYE/NIC payment for the period).
- In 2016 the Prime Minister launched ‘British Patient Capital’, a 10 year action plan to unlock £20b to finance growth in innovative firms. The Chancellor reported that since June 2018 commitments of £124m have already been made from this fund. In a new announcement, defined contribution pension schemes will now be permitted to invest in patient capital (as part of a prudentially diverse portfolio).
- Corporation tax relief to be reinstated for certain acquisitions of goodwill.
- EIS rules reformed, to:
- Require funds to focus on investments in knowledge-intensive companies,
- Give funds a longer period over which to invest capital,
- Allow investors to set income tax relief against liabilities in the year before the fund closes.
So, overall, a mixed bag for TechCo’s. What might be of more value, however, is moving the big picture narrative away from the era of austerity. We know from the last recession that the UK economy goes into sit-on-its-hands mode when there is uncertainty, so perhaps now there will be one less reason not to make that progressive business decision. Let’s not spoil the party by mentioning Brexit!