Autumn Budget 2024: Impact on Technology and Media
What Has Been Announced for the Technology Sector?
The government has stated that science and innovation are critical to the delivery of its Industrial Strategy, and it wants to maximise the growth benefits of the UK’s thriving digital and technology sectors.
As part of this, the government is going to publish an Artificial Intelligence (AI) Opportunities Plan with a roadmap outlining how AI can enhance growth and productivity and improve the delivery of services to the public.
The government has also announced R&D investment of £20.4 billion in 2025-26 including investment in research collaborations via Horizon. Universities are a core centre for innovation and many companies have started, scaled and grown from within the university ecosystem. The government has announced that it will support commercialisation by providing £40 million over five years for proof of concept funding, to support researchers spinning out from research organisations to a business for the future.
Aerospace technology was particularly cited by the Chancellor in her Budget announcement as of particular interest for investment, along with zero-emissions vehicles. These are part of the government’s investment in the advanced manufacturing sector.
The government is keen to tackle non-compliance within the tax system and so will be investing in technology to enable data sharing and explore new data innovations to tackle fraud and error.
The Chancellor has also announced the launch of a review of the barriers to the adoption of transformative technologies that could enhance innovation and productivity. The focus will be on the growths sectors identified in the governments Industrial Strategy green paper that was launched on 24 October 2024. This review will be led by the Government Chief Scientific Adviser and the National Technology Adviser.
While the government does seem to have stated a broad intention to invest in technology and innovation, much of the statements are at a macro level and it is not clear exactly how the SME or larger company is able to have access to the funds that the government has set aside.
Research and Development Tax Credits
The government has stated that the UK’s system of R&D tax reliefs are generous. Unfortunately, this is not shared by many companies across the UK, as SMEs have seen the benefit erode recently, following changes made by the previous government to the benefit from the schemes. Combined with HMRC’s rigorous approach to enquiries into R&D tax credit claims and the more attractive schemes available in countries that are close neighbours of the UK, the question is whether we will see a ‘brain drain’ away from the UK.
Capital Gains Tax (CGT)
The government has announced changes to the rate of CGT an individual will pay on disposal of shares. This includes for individuals that benefit from Business Asset Disposal Relief.
A number of tech companies may have been acquired by Private Equity or developed and grown by the original owners or a management team, with a view to a sale. These changes will affect the UK CGT payable by investors.
Employers National Insurance Contributions (NIC)
While the government has stated that it has been consistent with its manifesto not to tax working people, it has imposed an increase in the rate of Employer’s NIC to 15% from April 2025. This will affect employers in tech and media. It is balanced to a degree by the increase in the employment allowance from £5,000 to £10,500.
Corporate Tax Road Map
The Chancellor announced the launch of a corporate tax roadmap setting out its stall for the reviews and consultations it has in mind for the future.
Some of the Matters Covered Include:
Corporate Tax Rate – main rate to be capped at 25% for the remainder of the Parliament.
Capital Allowances (CA) – available for the acquisition of capital assets. Full expensing, the Annual Investment Allowance (AIA) and other allowances to be maintained throughout his parliament. Potential extension of full expensing for assets bought for leasing or hiring.
R&D Tax Credits – enhancing the administration of R&D reliefs by establishing an R&D advisory panel, launching a disclosure facility and consulting on widening the use of advance clearances in the R&D reliefs.
International Corporate Tax Matters – potential reforms to the UK rules on permanent establishments and diverted profits taxes. Consultations to follow.
Transfer Pricing – consultations on a number of aspects of transfer pricing including whether to reduce the threshold for exemption from the rules and a potential for multi-national organisations to report cross-border related party transactions to HMRC.
Who Does This Affect?
The changes could affect different technology companies in different ways depending on their profile and how and where they do business.
What Next?
While the Budget didn’t contain announcements that are specific to tech companies there are measures that will affect business and their owners depending on the specific circumstances.
Tech businesses and their owners should consider the measures introduced by the Chancellor as well as the roadmap ahead for future changes and reflect on how those changes could impact their businesses or personal circumstances. The Chancellor announced some tough measures but has predicted years of growth ahead. Tech businesses should be part of that growth agenda.
For further information on how the Budget could affect you and your business, please contact Leo Malkin, or your usual Crowe contact.
