With the Autumn Budget looming, the UK’s startups and small businesses are in limbo as they await news of what changes could hit their operations.
With the sting of the national insurance contribution rises enforced in last year’s Budget still being felt by businesses, signs of more tax rises to come means there could be uncertain times ahead.
So, what could this week’s Budget look like? In UKTN’s recent roundtable in collaboration with RSM UK, delegates discussed the essential nature of government strategy to drive growth, avoid duplicative standards and foster a supportive business environment – all factors that businesses across the UK hope to see boosted in the upcoming Budget.
Research published by RSM UK found that 99% of tech businesses have claimed for research and development (R&D) tax relief over the past 12 months.
Nearly a third (32%) submitted a claim that was approved but later challenged by HMRC, resulting in a repayment, while 26% submitted a claim that was challenged by HMRC but later approved.
An increase in this tax benefit would give a much-needed boost to UK businesses – but with the aforementioned tax rise rumours, it is schemes such as this that could be hit with a reduction to raise capital.
“We are doing all the upskilling at universities nationwide, yet people are going abroad to do R&D. The government’s aim is bringing that R&D back into the UK,” said Georgie Bole, corporate tax director at RSM UK.
“What I would like to see [in the Autumn Budget] are better rates coming through; distinguishing rates, not just high intensity loss.”
The lack of clarity and support around emerging technologies in the UK, such as quantum and green tech, could also be addressed. Promises in the Budget to foster targeted public-private partnerships to share risk and accelerate innovation in these sectors would be a welcome addition.
“We can’t expect the Microsofts and the Googles to absorb the risks [of emerging tech development] so we need support from the government to take it, embrace it and help push it forward,” says Cat Mora, director of research operations at Phasecraft.
“It would be great to see a firm commitment that’s long term because I think that’s the other problem we’ve had in the UK – priorities seem to change very regularly.”
A boost in this development could be achieved by taking advantage of international partnerships like UK-US tech projects to boost investment, knowledge sharing and competitiveness in the global market. Grant Smith, VP technology at Trustpilot, says clarity, focus, direction and significant investment in that direction is needed in this Budget.
“We need to be willing to fail, because that’s what success comes from – multiple failures. We need a government that understands how to do that and what they want to focus on, and then the investment will be there,” says Smith.
The talent conundrum
UK startups are no stranger to the struggles created by tech talent shortage. When it comes to hiring from across borders, there are ongoing concerns over a complicated and unclear immigration and visa process that is preventing top talent from working at UK businesses.
A streamlined and more transparent immigration and visa application process could help to overcome this battle.
“If the government is looking for some wins, a relatively low-cost initiative that could be put in place for a short policy period of six to 12 months is fast track visas, especially with some changes to family provisions and so on,” noted Dr Samantha Torrance, head of global government advisory at Access Partnership.
Increased incentives to bring business into the UK would be a huge Budget win for the government and businesses alike – and so too would the guarantee that the government would back the upskilling of workers in addition to visa process simplification.
Chancellor Rachel Reeves will need to find a way to balance such a pledge with the exit tax she has chosen to quash.
“If there’s a really good innovation relief scheme in the United Kingdom, you’re going to put a bigger workforce in there,” says Ben Bilsland, partner and head of technology industry at RSM UK.
“This creates employment and innovation – it’s what spurs us on, and that’s why it’s really, really important. The risk of too much red tape damages UK tech.”
What is clear is the desire to see a Budget that promises to develop and commit to a coherent, long-term strategy for tech, aligning tax incentives, regulatory frameworks and public-private investment. This is the backbone of the startup ecosystem in the UK, but something many businesses feel has been overlooked for far too long.
The Budget will be delivered by Reeves on November 26.
