2020 Budget – What’s in it for the tech industry?

13 March, 2020
by: Cripps Pemberton Greenish

In brief: the key technology areas covered by yesterday’s budget were:

  • £5 billion investment in gigabit broadband for hard to reach areas of the UK;
  •  £22 billion increase in public sector R&D investment;
     zero-rate of VAT on e-publications (including e-books and e-newspapers) so these have the same treatment as physical publications;
  • introduction of the 2% digital services tax;
  • pushing on with the changes to IR 35;
  • entrepreneurs relief down from £10 million to £1 million.


Deeper Dive:

Investment in Nationwide Digital Connectivity
This includes £5 million to roll-out full fibre broadband across the country, with the Local Full Fibre Networks Challenge Fund investing in the regions and a £510m investment in the Shared Rural Network – forecasts predict this will mean 95 per cent of the UK will get 4G coverage by 2025.

Digital Services Tax
The government will press ahead with its proposed digital services tax, which is due to come into force in April.

This will largely affect the US tech giants (Facebook, Google and Amazon) – adding at two per cent levy on their UK revenues – so has been heavily criticised by the US (which threatened to impose tariffs on French products in retaliation to a similar measure by the French government). HMRC calculates that it raise an extra £515 million in taxes by the end of fiscal 2025, however talks are ongoing to agree measures at an international level, which could replace our unilateral moves.

IR 35
IT is one of the sectors that will be most affected by the IR35 tax reforms (see our detailed blog on this: [INSERT CAMILLA’s BLOG)
The reforms have already seen many companies declare all their contractors ‘inside IR35’ or, reportedly, scrap their flexible workforce altogether. A worrying time for this sector of the work force which is already feeling the effects on jobs from Brexit.

The Government’s stated aim is to increase investment from its current level of £11.4bn to £22bn per year by 2024-25, putting the UK ahead of the USA, Japan, France and China in terms of investment as a proportion of GDP.

The plans include spending £900m to develop our national space strategy and space innovation, and to commercialise nuclear technology. It will also be put towards helping develop UK supply chains involved in electric car production.

£400m of the extra funding has been promised to go in 2020-21 for research institutes and universities across the UK to invest in research, infrastructure and equipment, with £300m to be spent on experimental maths research, boosting funding for PhD programmes and fellowships.

Tax relief on R&D has increasing slightly from 12% to 13% (worth around £2,400 of tax on a typical claim).

“Moonshoot” – Blue-Skies Funding Agency
The government announced it would spend at least £800m in a new “blue-skies funding agency” to fund “high-risk, high-reward science”. It will be based on the US agency ARPA – the Advanced Research Projects Agency which was behind Arpanet and early internet developments. Dominic Cummings has been keen on creating a UK ARPA for a while READ MORE.

Entrepreneur’s relief
The lifetime limit on gains that qualify for entrepreneurs’ relief (ER) will be reduced from £10 million to £1 million for disposals on or after 11 March 2020. The government estimates this will have an impact on around 120 individuals holding EMI options or shares acquired under EMIs.

Other plans
DCMS and the Department for International Trade will pilot a Digital Trade Network in the Asia Pacific region, “helping innovative UK companies to access opportunities in major new markets”.
There will be a review of the UK fintech sector led by Ron Kalifa, former CEO of WorldPay, to “support growth and competitiveness”.

General packages of support in light of the current and predicted effects of Coronovirus:
The Government is introducing:

  • loan guarantees for small businesses;
  • covering the cost of 14 days statutory sick pay for organisations with fewer than 250 employees; and
  • extending the business rates retail discount in England to 100 percent in 2020-21 for properties below the £51,000 rateable value.


For any questions related to tech, please contact Elliot Fry on 01892 506 584 or elliot.fry@crippspg.co.uk.