Autumn Statement Technology Sector

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Autumn Statement Points for the technology sector

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Autumn Statement Points for the technology sector Investment in infrastructure, productivity and research & development were some of the principal focuses of the Autumn Statement; we provide a summary below of some of the key points that affect the technology sector.

John Egan Associate Partner | Commercial john.egan@laytons.com +44 (0)20 7842 8000

Kathryn Beasley Solicitor | Corporate kathryn.beasley@laytons.com +44 (0)20 7842 8000

Autumn Statement: Technology Sector | January 2017

Games sector Prior to the Autumn Statement, Ukie1 published a letter it had sent to the Chancellor asking for seven key measures to be effected, including a pledge to continue the beneficial Video Games Tax Relief and the support of the Games Fund.

Although none of these seven measures were directly incorporated, Ukie seemed positive and felt there had been good news.

TIGA2 highlighted some room for further improvement, stating that the Government must maintain a competitive rate of corporation tax, possibly enhance Video Games Tax Relief and R&D Tax relief, and that “much still remains to be done” on the UK’s infrastructure.

Despite there being no direct commitment to the Video Games Tax Relief or Games Fund, the Government’s move to support the British Business Bank and make an additional £400 million available to its funds could be an important measure to help continue such reliefs post-Brexit and support investment in technology and games companies.

1.

The Association for UK Interactive Entertainment

2.

The Independent Games Developers Association

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Autumn Statement: Technology Sector | January 2017

UK Games Fund

Reviewing latest applicants for cash grants of up to £25,000 Read more →

Video Games Tax Relief Read more →

Prior to April 2014, UK games companies did not receive

It needs to be ensured that the above measures are

many of the tax breaks that their European competitors did,

implemented in a manner that allows the UK games industry

and it took years of campaigning for Video Games Tax Relief

to continue to grow, particularly at a time when the follow-on

to be introduced. Making sure that UK companies continue to

from the Brexit vote is still being decided and recent

receive tax relief and other support that at least matches or

innovations in the games industry present opportunities for

is better than that which is available to European competitors

further growth.

will of course be vital to the industry post-Brexit.

Our summary of some of the key points from the Autumn The Government’s pledge to improve technology

Statement for the Technology Sector follows.

infrastructure and make the UK a technology world leader, with the roll out of full-fibre broadband and 5G, will further support the productivity of the games industry and its capabilities.

There was also a focus on increasing R&D (including specifically in the field of Artificial Intelligence) and encouraging universities and businesses to work together.

Given that some successful UK games companies, such as NaturalMotion, started as University spin-outs the encouragement of this collaboration should further benefit the games industry.

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Autumn Statement: Technology Sector | January 2017

FinTech

Digital Communications

The Autumn Statement not only contained broader measures that will affect the FinTech industry, but it, and HMRC’s accompanying Green Paper, also contained points specifically seeking to support the FintTech Sector, including:

The Chancellor pledged to make the UK a world leader in the Tech Sector with over £1bn of Government funding to support: full-fibre broadband access by millions more properties and a core “spine” by 2020; future 5G communications; and investment therein.

•

•

£500,000 a year to the Department for International

Unreliable internet connection is an irritating pain for

Trade to support FinTech specialists in the promotion

consumers but can be acute for businesses. The intention is

of the UK market overseas

to make the UK a pioneer and future proof its infrastructure.

commissioning a ‘State of UK FinTech’ report for investors

•

appointing a group of regional FinTech envoys to make sure benefits are distributed nation-wide

•

modernising guidance on electronic ID verification to support the use of technology to access financial services

•

an additional £400m for the British Business Bank in venture capital funding to support start-ups and scale-ups

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Improving the infrastructure will increase the potential capability of apps, digital goods and services, transmission of data, and applications of the Internet of Things.

Autumn Statement: Technology Sector | January 2017

Research & Development

Finance & Venture Capital

Full-fibre broadband and 5G roll-out will be made through a new National Productivity Investment Fund. The Chancellor stated that: “We don’t invest enough in research, tech and innovation". He pledged to spend £23bn on innovation and infrastructure in the UK over the next five years. This spending is to include:

To further support UK start-ups and scale-ups, the Government announced that it will:

•

make available an additional £400m for venture capital funds through the British Business Bank for innovative firms looking to scale up. The role of the British Business Bank could increase post-Brexit to step in, fill the gap and help finance any reliefs or funding that is currently supported by the European

•

an extra £2bn per year by 2020-21 (an increase of 20%), to be spent on R&D

•

•

Investment Fund •

set-up a “Patient Capital Review” to identify and

supporting R&D funding for technologies such

break down the barriers to start-up and scale-up

as robotics, artificial intelligence and industrial

companies securing long-term investment, which will

biotechnology

be led by an advisory panel chaired by the former

£100m to be provided until 2020/21 to incentivise

head of Permira, Sir Damon Buffini

university collaboration in tech transfer and in working with businesses •

the above is in addition to the £100m the Government committed until 2020-21 to extend and enhance the Biomedical Catalyst fund

•

a new Industrial Strategy Challenge Fund, which will set identifiable challenges for UK researchers to tackle. This will be managed by Innovate UK and is based on the US’s Defense Advanced Research Projects Agency programme

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Autumn Statement: Technology Sector | January 2017

SEIS3/EIS4

Corporation Tax

These reliefs allow investors to make considerable tax savings. The Government announced that it will be making the following tweaks:

The Government commited to continue reducing corporation tax. As from April next year corporation tax will be reduced from 20% to 19% and from 2020 it will be 17% (at today’s rates this would make it the lowest of the G20 members after Russia and Turkey).

•

allow shares that have a right to convert into another class to now qualify

•

provide additional flexibility for follow-on investments made by Venture Capital Trusts

•

give Government the power to make regulations in the context of share for share exchanges in the Venture Capital Trusts regime

The Government has also announced a consultation into the advanced assurance regime (where companies obtain a statement from HMRC that it believes any issue of issue of shares by that company will qualify for either of the reliefs, which can act as an important comfort/incentive for investors). Laytons is planning on submitting its comments to HMRC, if you have any that you would like to include, please let us know by contacting us: John Egan | john.egan@laytons.com Kathryn Beasley | kathryn.beasley@laytons.com

3.

Seed Enterprise Investment Scheme

4.

Enterprise Investment Scheme

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Autumn Statement: Technology Sector | January 2017

Patent Box The UK Patent Box regime allows companies to have relevant income from their patented inventions taxed at a lower rate of 11% (10% from April 2017), rather than at the normal corporation tax rate. The Government has said it will extend the patent box to include R&D that is undertaken by companies collaboratively under a "cost sharing arrangement".

Your company may also benefit from the Patent Box if it uses a manufacturing process that is patented or provides a service using a patented tool.

What are the qualifying IP rights?

Qualifying IP rights are patents granted by the UK Intellectual Property Office (UK IPO), European Patent Office (EPO) and patents issued by other specified EEA national authorities.

Who can claim?

You can claim the patent box if your company is liable to UK The Patent Box is an elective regime that allows companies

Corporation Tax and makes a profit from exploiting patented

liable to UK Corporation Tax by 2017 to apply an effective

inventions. So it is not available to individuals or other

10% rate of corporation tax on worldwide profits attributable

unincorporated entities carrying on a trade.

to qualifying patents and similar intellectual property rights.

The normal corporation tax rate is currently 20%.

•

your company must own or hold an exclusive license in respect of the patents

What can you claim?

•

have carried out a qualifying development for the patent by making a significant contribution to either:

The Patent Box rate applies to a qualifying company’s profits

•

derived from: •

selling or licensing patented rights

•

selling patented products (including products incorporating the patented invention or bespoke spare parts)

•

compensation received for infringement of the patent rights

your company or another group company must

the creation or development of the patented invention

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a product incorporating the invention (‘Development’ condition)

•

if your company is a member of a group, it must also actively own the patented invention by taking a significant role in managing its whole portfolio of eligible patents (‘Active ownership’ condition)

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Autumn Statement: Technology Sector | January 2017

How and when to claim?

In order to benefit from the Patent Box regime, your company will have to make an election within 2 years after the end of the accounting period in which the relevant profits and income arose.

The full benefit of the regime is being phased in from 1 April 2013 and in the current financial year (1 April 2016 to 31 March 2017) the relief can apply in respect of 90% of the profits your company earns from its patented inventions.

Full relief will be available from the financial year starting 1 April 2017.

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