What’s in the Budget for the IT sector?

George Osborne, chancellor, said yesterday:

  • “Today we also set Britain this industrial ambition. That we turn Britain into Europe’s technology centre.”
  • “To be Europe’s technology centre we also need the best technology infrastructure…So today we’re funding ultra fast broadband and Wi-Fi in ten of the UK’s largest cities. Belfast, Birmingham, Bradford, Bristol, Cardiff, Edinburgh, Leeds, Manchester, Newcastle and London.”
  • “£50m will be available for smaller cities too. The fastest digital speeds in the world available in our cities, with the most connected countryside in Europe – and the most creative digital content anywhere.”
  • “I am announcing our intention to introduce similar schemes [to the UK film tax credit scheme] for the video games [from April 2013], animation and high-end TV production industries.”

His other announced measures, impacting or potentially touching the IT sector, include:

Above-the-line R&D tax credit

From April 2013, the government will introduce a credit for R&D, with a minimum rate of 9.1% before tax. Loss-making companies will be able to claim a payable credit. The government will consult on the detailed design of the credit shortly after Budget. Final rates, including for the payable credit, will be decided following consultation.

£60m for aerodynamic centre

Scheduled to open in 2012-13, a UK centre for aerodynamics will receive a £60m investment, with a brief to support innovation in aerospace technology, commercialise new ideas and spin-off technologies with wider applications in other sectors.

Revitalise EMI scheme

The chancellor pledged to improve and reform the Enterprise Management Incentive scheme, which helps SMEs recruit and retain talent, by providing additional support to help start-ups access the scheme.

Temporary opening for Sunday tech shops  

The chancellor will relax Sunday Trading laws from 22 July 2012 to 9 September 2012 inclusive, “recognising that the Olympics and Paralympics represent a unique opportunity for UK business.”

More  loans

In the days leading up to yesterday’s Budget, the chancellor launched the National Loan Guarantee Scheme (NLGS), designed to help businesses across the UK (who have an annual group turnover of up to £50m) to access cheaper finance.

Corporate Tax Road Map

Two key sections of the map – reform to the Controlled Foreign Companies rules (in Finance Bill 2012) to “better reflect the way that businesses operate in a globalised economy,” and the introducing of a Patent Box from April 2013, which will apply a reduced 10% rate of corporation tax for profits attributed to patents and similar types of intellectual property.

Start-up support after school

Before 2013, the government will pilot the best way to introduce a programme of enterprise loans to help young people set up and grow their own businesses.

IT sector reaction to Budget 2012:

Pointing to the funding injection for broadband, industry bible ThinkBroadband commented: “The [announced] level of funding is at a low enough level, that it should not cause distortion to the market, but should allow cities to ensure that commercial operators provide service across all parts of a city, rather than the patchy nature many suffer.

“Whether this will be enough to pull the UK ahead of the pack, and accelerate ahead of the rest of Europe and compete with the Far East with regards to broadband infrastructure, the amounts seem small.

“But as with the Broadband Delivery UK spending, £100m from Westminster, will be match funded by the local authority and similar funding from private companies, meaning that there may actually be £300m or more to spend in these ten cities.”

Turning to the chancellor’s overall ambition to make the UK Europe’s tech hub, IT recruiters at Modis International reflected: “With high aspirations for the UK’s technological leadership, further thought must be given to developing a talent pool.

“A lack of technology skills is hampering progress in information technology – an essential part of working life regardless of the industry sector. In recent Modis research with IT leaders, 27% are already struggling to source quality candidates with IT expertise.”

Meanwhile, leading IT and software analyst house TechMarketView told CUK: “The one way IT suppliers have found to balance out the reduction in the annual value of their largest contracts is by winning ‘add-on’ business related to the implementation of new government policy.

“This budget won't have disappointed in that sense, bringing plenty of scope for project work around, for example, tax avoidance and evasion, stamp duty, personal tax statements, corporation tax, and stamp duty.”

However, for one freelance IT services supplier, it’s the government’s policy that’s part of the problem.  He said:“[It would have been] nice if the tax advantages enjoyed by overseas firms bringing in workers to undercut UK workers, most notably in IT, were removed while we still have an IT industry to preserve.”

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