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Technology industry leaders have called on chancellor Jeremy Hunt to increase tax relief for expenditure on digital services ahead of his Autumn Statement next month.
The letter, signed by 14 companies and industry bodies, warned the government that inaction could harm Britain’s global competitiveness and aspirations to become a science and technology superpower.
Prime Minister Rishi Sunak has stated he wants to turn Britain into “the next Silicon Valley” but many industry leaders have been concerned that the UK is underperforming compared with its peers in developing a digital economy.
“Falling behind on digital adoption also means falling behind on the coming wave of AI deployment across the economy,” said the letter, which was sent to Hunt on Friday.
“Unless we can correct this, economic growth, competitiveness, and the ability to become a science and technology superpower is at risk,” it added.
The letter’s signatories included ecommerce groups eBay and Shopify, video conferencing company Zoom, computer and printer-maker HP and software provider Sage.
The groups have asked for support allowing them to claim up to 140 per cent on the first £50,000 of spending on “productivity enhancing” digital services — an extra 40 per cent deduction against businesses’ corporation tax bill compared with their current standard business expenses.
The groups said that implementing tax incentives would “empower” small and medium-sized enterprises and help them to leverage artificial intelligence to improve overall productivity.
The government said: “The UK has the lowest corporation tax in the G7, the joint most generous capital allowance regime of any major advanced economy, and a simplified tax system to save firms time and money.
It added that it had “introduced full expensing, an effective £27bn corporation tax cut which results in a 25p tax saving for every pound invested, as well as a new £500mn per year R&D scheme system for 20,000 UK SMEs.”
The groups suggested that support could take the form of a scheme similar to Australia’s small business technology investment boost, which offers companies with an annual turnover of less than A$50mn (£26mn) an additional 20 per cent deduction on technology expenditure.
They added that raising productivity was “vital” to “help reduce inflation and prevent the UK falling behind other high-tech nations”.
Sunak and technology secretary Michelle Donelan launched a 10-point plan in March to “cement” the UK’s place as a science and technology superpower by 2030. It included boosting investment in research and development and creating “pro-innovation regulation”.
According to research by Sage in 2022, if SMEs “unlock the full benefits of technology” this could add £232bn to the economy.
Other signatories of the letter included industry bodies TechUK, the App Association and Global Tech Advocates, as well as regional groups North East Chamber of Commerce and ScotlandIS.
