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This article appeared in the York Press on Thursday 10, December, 2009

Hi-tech Boost

Adrian Widdowson, Associate Tax Partner

Adrian Widdowson, associate tax partner of Garbutt & Elliott, examines how Chancellor Alistair Darling’s Pre-Budget Report is likely to affect York and North and East Yorkshire.

Hi-tech firms in Science City York can celebrate at being among the few sectors that apparently will benefit from Chancellor Alistair Darling’s Pre-Budget Report.

Bioscience and IT were both mentioned specifically in the Chancellor’s statement as areas that he wishes to encourage.  For instance, there is to be an easing of the research and development tax credits scheme, allowing small and medium-sized companies to claim the relief without having ownership of the intellectual property that results.  This should allow more flexibility in commercial arrangements and is welcome.  For companies that do own intellectual property, the new corporation tax rate on royalty income drops from a minimum of 21 per cent to only 10 percent.

That should provide an incentive for innovation.   One caveat, though; this is to be brought in from April 2013, and the only announcement so far is that consultation on the design of the tax rate system is to come.

Companies in these and other innovative industries looking to raise capital may be affected by changes in the Enterprise Investment Scheme and Venture Capital Trust regimes, which appear, on balance, to be adverse.

The big story in the Pre-Budget is the new payroll tax on bank bonuses.

This is likely to hit the City of London hardest, but if the pundits’ predictions of mass emigrations of talented people prove correct, the effects may well permeate downwards to the local level for years to come.

There was a brief mention in the Chancellor’s speech that the Government will “respond” to proposals for a new high-speed rail link from London to the North and Scotland.  Details are yet to come, but it may be that a long-awaited fillip to the region may be a bit closer.

As at the time of the spring Budget, there are not many reasons for optimism.

Time will tell whether this Government or the next will have to carry these ambitious policies through.