Legal briefing | 01 Nov 2021 |

Autumn Budget 2021: tech related proposals

Our Autumn Budget website, put together by our colleagues in the Tax team, is live. You can view it here: Autumn Budget 2021. Of particular note to our clients operating in the Technology Sector, is the announced expansion of R&D tax relief to include "data and cloud computing costs" as a class of qualifying R&D expenditure to which relief can be applied. The objective being to better support cutting edge research methods, and reinforce the UK's status as a 'science superpower'. The expansion represents recognition of how companies currently carry out R&D including small businesses that make use of cloud computing and data driven technologies. This fits with the Government's National Data Strategy, published last year, which sets out plans to build a world leading data economy, and also the Government's Top 10 Tech Priorities, one of which is 'unlocking the power of data'.

Relief will also be refocussed on R&D activity carried out in the UK, which could have a significant impact on businesses given the Office of National Statistics' estimate that nearly half of expenditure on which R&D tax relief was claimed in 2019 took place overseas.

Further details are expected in the autumn, and the changes are intended to be legislated in the Finance Bill 2022-2023, to take effect from April 2023.

Tax partner at Travers Smith, Hannah Manning, had this to say about the relief: "If there was a theme to the announcements, it was perhaps a focus on UK business remaining competitive in a post-Brexit world. Extensions to R&D tax reliefs to include data and cloud computing costs were highlighted by the Chancellor in his speech, but the intention to reform the reliefs to focus on activities carried out in the UK may outweigh the impact of these changes."

The other announcement which will be of interest, particularly to those clients operating in the retail sector, is the Government's continued consideration of implementing an online sales tax. Intended to level the playing field between online and high street retailers, the UK wide tax on online sales of physical goods, with a proposed rate of 2%, would likely have further reach than the existing Digital Services Tax which is targeted at the largest online digital platforms. A consultation on the new tax is due to be published shortly.

Commenting on the proposal, Commercial, IP & Technology partner, James Longster said that "Although the online sales tax is presented as a measure to level the playing field between online and 'bricks and mortar' businesses, many retailers have a foot in both camps anyway – and its far from clear that any loss of online sales will be compensated for by increased sales on the high street."