Chancellor of the Exchequer Phillip Hammond has given his final Budget before the UK is set to leave the EU. Here, IP and creative partner Laura Harper and employment partner Paula Rome discuss some of the key announcements in their respective sectors.
The chancellor announced that the UK would introduce a “narrowly targeted” digital services tax on large technology companies such as Google, Facebook and Amazon. The chancellor said “it is only right that these global giants, with profitable businesses in the UK, pay their fair share towards supporting our public services.” However he wanted to reassure the digital community that the tax was only aimed at the tech giants; the new tax will only apply to companies that are profitable and have a global revenue of £500 million per year. The 2% tax is focussed on advertising revenue from search engines, social media platforms and online marketplaces and will come into effect in 2020.
The government were keen to highlight that they have made the UK “a prime location to invest” by cutting corporation tax from 19% to 17% and supporting the creative sector through tax reliefs which benefit businesses including those operating in the games, video, film and TV sectors. No further specific tax reliefs for the creative industries were announced, however, the minimum qualifying period for Entrepreneur’s Relief has increased from 12 to 24 months which should provide support to start-ups by benefiting their investors. The British Business Bank’s Start Up Loans Programme will also be extended to 2021.
There will also be targeted relief for the cost of goodwill in the acquisitions of intellectual property (IP) rich businesses with eligible IP from April 2019.
The chancellor announced a series of investments in full fibre networks across the country. The budget has allocated £200 million to pilot new approaches to full fibre deployment in rural locations, with a voucher scheme running for local businesses.
The Intellectual Property Office will support more companies in using their IP to obtain access to finance and will work with banks to improve opportunities and awareness on the true credit risks associated with such lending.
To support the adoption of new technology by UK businesses an additional £155 million in funding for The Digital Catapult was announced, an increase on the £1 billion already committed.
Finally, £8.5 million will be used to support Coventry UK City of Culture 2021 and £115 million was announced for a UK Festival of Innovation and Creativity in 2022 to showcase the UK’s art, culture and technology and encourage inward investment.
This year’s budget included the “good news” that employment rates are higher with 3.3 million more people in work since 2010 and a growth in wages at its highest in nearly a decade. This hides concerns that many of the jobs created are neither permanent nor full time. Also announced are changes to the way self-employment status is determined (replicating recent changes in the public sector to medium and large private companies) placing responsibility on the businesses to determine the taxable status and potentially increasing the tax liability for individuals, however this will not happen until 2020. The unpopular apprenticeship levy has not been removed but amended for small businesses reducing the contribution of small companies from 10% to 5%.