The spring 2023 statement brings “improved” tax incentives for technology SMEs

British Chancellor Jeremy Hunt said the government plans to introduce tax incentives for UK-based small and medium-sized enterprises (SMEs) as part of a wider range of plans to boost Britain’s tech sector.

Delivering the government’s Spring 2023 statement to the House of Commons on Wednesday, Hunt said the stimulus would include an “extended” tax break for SMEs.

The move will mean that qualifying companies that spend 40% or more of their total spend on research and development will be able to claim a credit of £27 for every £100 spent.

“This is a £1.8 billion support package that will help 20,000 top companies that are transforming Britain into a scientific superpower every day,” said Hunt.

The announcement, widely welcomed by those across the industry who spoke to IT Pro, represents only a partial rollback of the widely criticized changes outlined in the November fall statement.

A reorganization of the R&D tax credit system in November resulted in less support for small companies seeking tax incentives and was criticized as a move favoring larger companies.

An open letter released by Coadec in response to the move claimed that the changes would likely cost UK startups an average of £100,000.

Julian David, CEO of techUK, hinted at the time that the changes would “disappoint many tech SMEs” and continue to frustrate business owners.

Additional tax breaks for UK companies will also be introduced over the next three years, Hunt confirmed. A new policy of full capital expenditures will be implemented with the intention of making this permanent.

According to the Chancellor, this means that “every single euro that a company invests in IT equipment, systems or machines can be fully and immediately deducted from taxable profits”.

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OpenUK CEO Amanda Brock said start-ups and scale-ups “greatly welcome” the news.

“This could – if easily accessible – be a huge benefit to the UK tech sector and provide a real opportunity for growth, but still won’t work without the right skills and IP environment.”

Spring statement 2023: AI innovation

The Chancellor said the government plans to draw on “British ingenuity” to position the country as a global science and technology superpower – an aim repeatedly voiced in recent campaigns.

Hunt told MPs that the government plans to accelerate support for quantum computing and AI innovation over the next decade with a range of stimulus and investment packages.

“I will take action to strengthen our position in artificial intelligence, where the UK is home to a third of all European companies,” he told the Commons.

This includes the launch of an “AI sandbox” aimed at providing greater support to AI companies and researchers to drive innovation and “bring breakthrough products to market”.

Hunt added that the government will also work “at pace” with the Intellectual Property Office to “provide clarity on IP rules so generative AI companies can access the material they need.”

Intellectual property rights in the field of generative AI have sparked controversy in recent months, with a series of court cases claiming that generative AI models – particularly image-generating models – often violate IP legislation.

In a pledge of additional support for individual companies and researchers, Hunt said the government will introduce an annual prize fund that will award up to £1million for outstanding examples of AI innovation.

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“I would also like to promote the best AI research in Great Britain,” said the Chancellor. “Each year for the next ten years, a £1million prize will be awarded to the person or team carrying out the most groundbreaking British AI research.”

Spring Statement 2023: Quantum Ambitions

Alongside this focus on AI innovation, the Chancellor confirmed that the Government will provide £900m in funding to implement the recommendations outlined in the Future of Compute Review to deploy an ‘exascale’ computer and boost investment in quantum computing.

“The power required by the complex algorithms of AI can also be provided by quantum computers,” he added. “That’s why today we will publish a Quantum Strategy setting out our vision to be a world-leading quantum-enabled economy by 2033 with a combined £2.5 billion research and innovation programme.”

The government’s increased focus on quantum capabilities comes at a globally exciting time in space.

While China and the United States remain the two big leaders in global quantum computing, the government has been keen to highlight their potential for the future of the UK economy.

A recent analysis shows that the UK has a clear lead in terms of the number of quantum startups in Europe, with 39 companies compared to 18 in Germany and 15 each in the Netherlands and France.

Responding to the Spring Statement, Julian David said the Government had “put the UK back on course” when it comes to global competitiveness in science and technology.

“By adopting a quantum strategy, investing £900m in new UK computing capacity, adopting Sir Patrick Vallance’s recommendations on new technologies and providing new business incentives, the Government has taken steps to boost the UK’s science and technology capacity .”

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