During the UK’s 2017 Autumn Budget speech, the Chancellor announced the following package:
- £500m support for 5G mobile networks, fibre broadband and artificial intelligence;
- £2.3bn for additional research and development activities; and
- Digital economy royalties relating to UK sales paid to a low tax jurisdiction to be subject to an income tax clampdown.
This was supported by the following related announcements in education:
- Funding for 8,000 new computer science teachers in England; and
- A package in England worth up to £177m to promote further maths studies at schools and sixth form colleges.
To read the full overview of the UK's 2017 Autumn Budget, please click here.
Comment from Mike Kane, Partner and Head of Business Law
The rate of change of the way in which business is being conducted and the nature of business and products is staggering. In many respects, tax authorities across the world are struggling to apply a tax system built and developed for a traditional economy to a new and rapidly evolving economy in the digital age – one where commerce transcends national boundaries and to a degree has a choice over the jurisdiction in which it wishes to be taxed. The Chancellor clearly knows there is a problem with this but has he gone far enough and will our tax system cope with the scale and rate of change?
There is further recognition in the budget of the importance of the digital economy and it is critical that we develop not only a tax regime to suit but the other infrastructure and talent pool to keep the UK competitive. Research and Development (R&D) tax breaks have their critics but a number of our technology clients, for example, have relied extensively on these through the years, and the R&D tax credits are a vital lifeline for some of these early stage businesses.
In many cases, the traditional model of paying for the acquisition of a business based on multiples of profits is out of the window and buyers are paying for technology and the developers behind them in an increasing number of “acqui-hire” deals. These sales proceeds often originating overseas are recycled back into the economy and demonstrate the importance of investment in R&D. Developer literacy and maths play a fundamental role in that process at an earlier stage and it is insightful that with the limited room to manoeuvre available to the Chancellor, he has singled out these critical skills.