How will the Budget affect me? What business owners need to know
Especially interesting for tech start-ups, and businesses looking to raise EIS investment, here's what all entrepreneurs should know about today's Budget..
For the first time in nearly 20 years, a chancellor of the exchequer has unveiled an Autumn budget and there's some key announcements tech start-ups and businesses looking to raise EIS investment need to know about.
His second ever budget, Philip Hammond heaped praise on small business owners – who he called the “backbone of the UK economy”.
Declaring that the UK needs to “seize the opportunities” from Brexit and become an “outward looking, free-trading nation”, Hammond stressed the importance of Britain building a “deep and special partnership” with its EU neighbours.
Discussing the UK's position as a global tech leader, Hammond said: “A tech business is formed in Britain every hour, and I want that to be every half hour.”
So, what exactly do small business owners need to know from Budget 2017? Read below to find out…
An extra £3bn for Brexit preparation
An extra £3bn will be set aside to help the UK prepare to the leave the European Union over the next two years, regardless of what the eventual outcome is, to “ensure a smooth transition”.
It will include funding to prepare the border, the future immigration system and new trade relationships. £1.5bn of additional funding will be made available in each of 2018‑19 and 2019‑20.
£500m investment to help tech scale-ups
The government will invest £500m in UK tech innovation “in a range of initiatives from artificial intelligence, to 5G and full fibre broadband” to ensure scaling tech start-ups reach their full potential.
To secure the UK’s world-leading position in digital innovation, the government will invest £21m over the next four years to expand Tech City UK’s reach – to become ‘Tech Nation’ – and support regional tech companies and start-ups to help them scale.
Tech Nation will roll out a dedicated sector programme for leading UK tech specialisms, including AI and fintech.
Regional hubs will be located in: Cambridge, Bristol, Bath, Manchester, Newcastle, Leeds, Sheffeld, Reading, Birmingham, Edinburgh, Glasgow, Belfast, and Cardiff.
The world’s first national advisory body for artificial intelligence, The Centre for Data Ethics and Innovation will be created to set standards for the use and ethics of AI and data – with the aim of the UK becoming the world leader in developing practical uses for tech.
A further £1m will also be extended to the UK Games Fund until 2020, aiding access to finance and business support for early stage video game developers.
National Living Wage
From April 2018 the national living wage will rise 4.4% from £7.50 an hour to £7.83.
Business rates indexation will change sooner
A planned switch in indexation from RPI to CPI (the main measure of inflation), will be brought forward by two years to 1 April 2018. A move which Hammond claims will save businesses £2.3bn.
The government will also publish draft legislation shortly on legislating retrospectively to address the “staircase tax”.
Affected businesses will be able to ask the Valuation Offce Agency (VOA) to recalculate valuations so that bills are based on previous practice backdated to April 2010 – including those who lost small business rate relief as a result of a court judgement.
The £1,000 business rate discount for pubs with a rateable value of up to £100,00 will continue.
Future business rate revaluations will also take place every three years not five years.
Biggest increase in R&D spending “by any government in the last 40 years”
In a bid to raise the level of investment in R&D in the economy to 2.4% of GDP, a further £2.3bn has been allocated for investment in R&D – with R&D tax credits increasing to 12%.
Access to finance and the Enterprise Investment Scheme (EIS)
A new £2.5bn ‘British Patient Capital’ entity will be incubated within the British Business Bank. It will invest commercially into venture and growth capital, but with significant extra resources.
It will be designed from the outset with a view to floatation or sale – subject to a value for money assessment – once it has built its portfolio and track record.
The annual allowance for people investing in “knowledge-intensive companies” (firms whose employment structures are heavily weighted towards scientists, engineers, and other experts) via the Enterprise Investment Scheme (EIS) will also be doubled.
The annual investment said companies can receive through EIS and the Venture Capital Trust scheme will be doubled too – with a new test to reduce the scope for and redirect low-risk investment also being introduced.
It's hoped this move will unlock over £7bn of growth investment.
VAT registration threshold
Contrary to speculation that the VAT registration threshold might be reduced, Hammond announced it would stay at £85,000, (despite it being “by far the highest in the OECD”), for two more years from April 2018.
However, the government will consult on reforming the current structure, specifically in response to the Offce of Tax’s report Value Added Tax: Routes to Simplifcation.
For import VAT, the government has acknowledged the benefit for businesses of postponed accounting when importing from the EU – and this will be considered in any Brexit discussions.
Keen to back the Northern Powerhouse once again, a new £1.7bn Transforming Cities Fund to improve connectivity and reducing congestion will be launched.
Half will be allocated via competition for transport projects in cities and the other half will be allocated on a per capita
basis to six combined authorities with elected metro mayors.
This will include £74m for Cambridgeshire and Peterborough, £243m for Greater Manchester, £134m for Liverpool City Region,
£80m for West of England, £250m for West Midlands and £59m for Tees Valley.
Up to £35m will be invested to improve digital connectivity on the trans-Pennine route between Manchester, Leeds and York.
£5m will be provided to help enable the South Tees Development Corporation take ownership of the SSI Redcar Steelworks site.
Finally, the government will lend local authorities in England up to £1bn to support infrastructure projects.
A total of £540m is being invested into electric cars, including £400m to build more electric car charging points via a charging infrastructure fund – dramatically adding to the current number of 4,500 charging stations.
The extra £100m will be offered via a Plug-In-Car Grant with £40m going towards charging R&D.
Hammond said the initiatives should pave the way for driverless cars, adding that red tape will be cut to allow tech businesses test autonomous cars on public roads by 2021.
While people charging their electric cars at work will not face a benefit-in-kind charge from next year.