Rishi Sunak/HM Treasury
What the Spring Statement means for UK fintechs
The chancellor increases the employment allowance to reduce taxes on SMEs and expands R&D tax relief to include data, cloud computing and pure maths.
Though Wednesday’s Spring Statement was largely aimed at supporting individuals and families with the increasing costs of living, it also heralded new benefits for UK fintechs – albeit with some deferred until later in the year.
In addition to income tax relief and fuel duty cuts, Rishi Sunak, chancellor of the exchequer, declared that the second phase of his plan was to create a “new culture of enterprise” by focusing on “people, capital, ideas”.
What are the changes?
Sunak promised to expand research and development (R&D) tax relief to include data, cloud computing and pure maths; a move that the Coalition for a Digital Economy (Coadec), said was positive.
“We were pleased to see the announced expansion of R&D tax credits to cover pure mathematics, with sectors like AI, quantum and robotics standing to gain the most,” Coadec said in statement.
The chancellor also announced a £1000 increase in the employment allowance per company, effective 1st of April. The allowance – which now stands at a total of £5,000 – will further cut tax bills for half a million small businesses across the UK.
Sunak outlined further plans to consider “tax cutting options on business investment and innovation” which will be announced at the Autumn Budget following consultation with businesses over the summer, identifying three key areas of focus:
UK employers spend less than half the OECD average on employees’ training, according to the chancellor. Sunak pledged to review the current tax system, including the operation of the apprenticeship levy, to ensure the government is doing enough to incentivise businesses to invest in “the right kinds of training”.
The chancellor claimed that innovation was a key driver of UK productivity growth pre-global financial crisis. Since then, he said, the UK’s progress has slowed substantially, and innovation dipped; something he claims has widened the productivity gap between the UK and the US.
“The amount that businesses spend on R&D as a percentage of GDP is less than half the OECD average, despite spending more on tax relief than almost every other country,” said the chancellor. “Something is not working.”
Sunak confirmed the government would expand the scope of the R&D tax credits, as well as considering making the R&D expenditure credit more generous in the Autumn Budget.
Sunak blamed the productivity gap between the UK and more productive European players, like France and Germany, on weak private sector investment. He claimed that capital investment by UK businesses continues to lag considerably behind the OECD average of 14 per cent.
To remedy this, he confirmed his intention to address this in the Autumn budget with tax cuts on business investments to stimulate growth.
The changes have generally been well received by the fintech community.
“It’s refreshing to see the Chancellor finally offer long overdue support for UK SMEs in the form of the proposed tax cuts,” said Chirag Shah, CEO and founder of Nucleus Commercial Finance. “Reducing employer NICS bills by £5,000 a year – worth £1,000 per employer – will benefit around 495,000 businesses.”
However, some remain skeptical as to whether enough is being done to support smaller businesses.
“One thing HM Treasury will have to keep a close eye on is the resilience of small businesses,” said ThinCats CEO Ravi Anand. “Smaller businesses borrowed considerably more compared to mid-sized businesses, yet their working capital is in a significantly weaker state. Even with some of the measures announced today, it is likely we will begin to see an uptick in insolvencies in the coming months.”