The Chancellor of the Exchequer presented his Autumn Budget on 22 November 2017. Without a clear idea of what the economy will look like 12 months from now, and Brexit negotiations hanging in the air, it proved difficult for the Chancellor to make any significant fiscal policy changes at this time, however there are possibilities of the Chancellor taking the opportunity to boost public finances, invest in R&D and introduce reforms on stamps duty and pensions. Only time will tell, if this works.
Some key takeaways:
EIS and higher risk businesses
This was a very high-growth focused budget, with some important announcements that should help the sector to continue to flourish. Investors using the Enterprise Investment Scheme (EIS) as a tax-efficient wrapper were rewarded with a surprise doubling of the investment limit, but told that the scheme rules would be tightened to prevent investors using it for low-risk assets. The government said it would be introducing a new test to reduce funds flowing to low-risk investments as part of the finance bill. Some initial consultations have already taken place with the Patient Capital Review.
One of the most pleasing was the plan for scale-up businesses. Some had expected EIS and Venture Capital Trusts (VCTs) to be targeted by the chancellor for reductions in tax relief in the Budget. Instead, he said he would double the maximum investment in EIS schemes from £1m to £2m, providing investors put money into “knowledge-intensive” companies. The government said it expected the change to add £7bn to the total committed to early-stage enterprises.
The impact from this will be great. It will mean there’s more liquidity available to fund growth. The level of investment has already gone up this year, and we think the availability of this kind of capital will massively enhance competitiveness. If you'd like to talk simply contact us and we'd be happy to talk through recent EIS developments and our EIS Services.
Research and development (R&D)
There was also a strong commitment for research and development (R&D), with the government allocating a further £2.3bn and spending £500m on initiatives including artificial intelligence, 5G and fibre broadband. The increase in R&D spend will result in an increase in the rate of the RDEC from 11% to 12% with effect from 1 January 2018. The government will also introduce a new Advanced Clearance Service for RDEC claims for up to three years prior to filing. If you'd like to talk to us about our award winning R&D Tax Credits Services, please contact us.
Investment being expanded
The National Productivity Investment Fund is being expanded to £31bn from £23bn, (and will run for an extra year to 2022/23), where access will be given to public bodies to support procurement of innovative projects through the Small Business Research Initiative (SBRI). Meanwhile the government eased concerns by saying it would replace European Investment Fund lending if needed. The Enterprise Finance Guarantee will also be extended to March 2022 and expanded to support up to £500m of loans a year. There will be £540 million to support the growth of electric cars, including more charging points. Across these initiatives it’s great to see the government investing in areas that will not only support employment but also help businesses gain access to crucial funding.
Artificial Intelligence (AI)
Though the advancements in AI and deep learning have enabled some companies to do some real innovative work.The UK recognises this and plans to establish “the world’s first national advisory body for artificial intelligence” with the Centre for Data Ethics and Innovation that will set standards for the use and ethics of AI and data, with the aim to lay the groundwork for “practical development” in the field. It will be conducting an independent review of AI to get things started. The plan is to invest at least £75 million into the field of AI, to build data trusts to help train and run AI systems; to establish AI 'fellowships' and to provide grants to fund PhDs in the field to secure the UK’s leading position in the global AI market. We think this a positive step forward.
So it’s been a positive budget on this, and very reassuring, too. It shows a commitment to maintaining the momentum we have as one of the leading countries in Europe for fast-growth tech businesses. If you would like to learn more or speak to one of our experts feel free to request a callback.