UK Autumn Budget 2021 – TMT insights

This article forms part of our wider Budget 2021 coverage including expert analysis of the tax aspects which can be found on our Budget Hub.

The Autumn Budget contained very little in the way of significant immediate tax changes for the TMT sector, which is perhaps surprising given the Government's commitment to investing in our technology sector and green future (which are closely aligned). However, for many this will also be short term relief, as post COVID claw back through taxation seemed inevitable. We've highlighted the five key Budget takeaways for the Technology sector:

1. R&D tax reliefs: TMT businesses may be pleased to see that from April 2023, R&D tax reliefs will be reformed to support modern research methods. The rules will expand qualifying expenditure to include data and cloud costs, to more effectively capture the benefits of R&D funded by the reliefs through refocusing support towards innovation in the UK.

2. Business Rates Review: TMT businesses with consumer facing retail stores such as telecoms and tech companies will welcome the government’s report into the Business Rates Review. The report sets out a range of measures which the government will introduce with the intention of reducing “the burden of business rates in England”. In particular, the report indicates that the measures are designed to focus on supporting the retail industry and the high street and encouraging investment and improvement to existing properties which may otherwise not be pursued due to a resulting increase in business rates.

3. Diverted Profits Tax (DPT): The TMT sector has been one of the key targets of DPT since its introduction in 2015, and in this Budget, there was good news and bad news on DPT. The extension to the period in which taxpayers can amend their CT return to make transfer pricing adjustments (and avoid a DPT charge) and bringing DPT within the Mutual Agreement Procedure (MAP) framework will be very welcome. However, in addition, a new section in the legislation which allows HMRC to refuse issuing closure notices on CT returns until the DPT position is finalised will likely be controversial for many ongoing enquiries. This change to the legislation only seeks to highlight that the interaction between DPT review periods and open CT enquiries will continue to be a complex area which will depend on the specific facts and circumstances of each taxpayer.

4. Wider Tax Implications: More generally, all businesses regardless of sector will be looking closely at the impact of an increased rate of corporate tax to 25% from April 2023; the new legislation in relation to the notification of uncertain tax treatment by large businesses; and the abolition of cross border group relief for EEA-resident companies.

5. Online Sales Tax: One to watch is the proposed Online Sales Tax which has been mooted in this Budget and will be an important development going forwards. HMRC will continue to seek views on how this should be implemented, but it is certainly not going to go away. Affected businesses should stay close to government consultations to shape the outcome.

Our full review of the all the most significant tax measures from yesterday's Budget can be found on our Budget pages.