Today marked the last Spring Budget and Philip Hammond's first Budget as chancellor.
Our legal experts comment on the plans unveiled around technology and connectivity, what more funding in to academia will mean for business, employment practices ('returnships' in particular), and reforms to pensions and tax.
Corporate
Alastair Peet, corporate partner commented on the opportunities the £270m fund for the tech industry will bring to the UK and to investors:
'The Chancellor's announcement of a £270 million fund to help develop Artificial Intelligence, biotech enterprise and driverless cars will be seen as a welcome boost by start-ups and established companies alike. The announcement can also be taken as an acknowledgement by the government that the UK has considerable talent in the tech industry that warrants sufficient support to develop it. The UK is the world leader for AI start-ups and this has been evidenced by global tech giants snapping up UK-based AI start-ups such as Microsoft buying Touchtype and Apple acquiring VocalIQ.
'It is possible this kind of fund will help to stimulate more venture capital investment too, as money for development means more opportunities for UK-based and overseas investors to invest in new platforms and products.
'This announcement gives assurance to those operating in and around tech that the government is taking seriously all of the opportunities that AI will bring, and is preparing for a more connected country in an increasingly globalised world.
Tax
Kate Featherstone, tax partner, comments on proposed tax reforms:
'A shake-up of the tax treatment for those who are self-employed or choose to work through a personal service company has been threatened for some time and, in his Spring Budget 2017, Phillip Hammond took steps to address the disparity between the taxation of employees and the self-employed. 'Amendments to the State Pension mean there is now little justification for the self-employed to pay less tax than the employed. While the government are keen to encourage entrepreneurialism and self-employment, they do not want tax savings to be the sole motivation for an individual to choose to be self-employed as opposed to employed. The following changes were therefore announced.
The self-employed
'An increase of the main rate of Class 4 National Insurance Contributions from 9% to 10% in April 2018 (and then 11% in April 2019) increases the tax burden on self-employed individuals with profits over £16,250.'
Working through a personal service company
'The tax-free dividend allowance will be reduced from £5,000 to £2,000 from April 2018. Those who provide their services through their own personal service company will, from April 2018, have to pay tax on any dividends over £2,000, thereby reducing the tax advantages of providing services in this manner.'
Employment
Antonia Blackwell, senior associate in the employment team, commented on the chancellor's announcement to support 'returnships':
'Today's budget has limited impact in the sphere of employment law. However, it is encouraging to see the Chancellor recognise the need for individuals to have the opportunity to retrain and upskill at all points in their life. To achieve this the Government has stated its intention to work with business groups and public sector organisations to identify how best to increase the number of returnships, supported by £5 million of new funding. Returnships offer people who have taken lengthy career breaks a clear route back to employment.
In addition, as part of its commitment to ensuring public services deliver for everyone, the government has agreed to create a new £5 million centenary fund for projects to celebrate the centenary of voting rights being extended to women for the first time in 1918, such as to educate young people about its significance.
Commercial TMC
Joe Stephenson, senior associate in the TMC team comments on plans for the UK's digital infrastructure:
'As heavily trailed in the press, this, the final spring budget, introduces a raft of measures intended to boost Britain's public and private engagement in digital infrastructure.
'In a Budget characterised by cautious spending, the Chancellor's announcement of a £270 million fund to support development of AI, biotech enterprise and driverless cars is a clear indication of government focus on a high-tech and connected post-Brexit British economy.
'In a nod to the National Infrastructure Commission's Connected Future report, the Budget also includes details of:
- UK government-backed fibre and 5G trials, including preparedness across Britain's roads, railways and city centres;
- aggressive promises in relation to digital connectivity across the United Kingdom, including a £200 million fund for fibre broadband projects;
- new funding to support STEM subjects at university level, including a £300 million research fund and 1,000 new PhD places; and (predictably)
- promises of post Brexit openness.
'If this Budget's overriding aim is to demonstrate a Britain strong outside of the EU, the object for digital is a clear message that the United Kingdom remains open for global, tech driven business. A potentially challenging balance to strike.
'Whilst the above demonstrates a strong, tangible prioritisation of digital infrastructure concerns, it is important to interpret all spending in light of the Government's broader deficit reduction objective. As the difficulties surrounding the rural broadband role out have demonstrated, infrastructure spend can often take a backseat in times of political and economic uncertainty.'
Shoosmiths commercial partner Andy Brennan, also comments on the chancellors plans to pump more funding in to academia:
'The chancellor has just announced he is allocating £300m to support the brightest research talent, including for 1,000 PhD students in STEM subjects, including maintenance loans for part time undergraduates and doctoral loans in all subjects for the first time.
'These plans signal a firm commitment to extract the very best talent the UK has got to give. It also links in with the government's wider industrial strategy, representing a further commitment to research and innovation and the knowledge economy.
'The long-term aim of giving greater access to higher education at PHD and Doctoral level is to boost the prospect of a thriving economy. Lifelong learning will help more people get higher skilled jobs and will no doubt present greater opportunities for more high growth and technology led businesses to flourish, creating benefits for all.'
Pensions
Paul Carney, pensions partner at Shoosmiths comments on the chancellor's crack-down tax avoidance and plans surrounding master trusts:
Preventing tax avoidance
'The chancellor has announced measures which are intended to prevent tax avoidance through the use of overseas pension schemes/ arrangements. It has been possible to transfer funds from a UK pension scheme to an overseas scheme provided that that scheme is included on a government published list of qualifying recognised overseas pension scheme (QROPS). The intention is to introduce a 25% tax charge on transfers to QROPS and, the government states, the idea is to target '...those seeking to reduce the tax payable by moving their pension wealth to another jurisdiction". Exceptions apply where (let's say) there is a good (i.e. genuine) reason for the transfer so; those seeking to emigrate and take their pension monies with them to their new country should be ok.'
Master trusts
'Over the last few years, there has been a growth in the number of and use of master trust pension schemes; master trusts are (as the name indicates) trust-based pension schemes constituted as multi-employer schemes for employers which are not associated with each other. The government has previously expressed concern about the regulation of such schemes and has confirmed that it will change the tax registration process for them. The intention is to make the process for the registration of master trusts consistent with the Pension Regulator's new authorisation and supervision regime.'