Today [22 November 2023], chancellor of the exchequer Jeremy Hunt delivered the annual autumn statement, where he outlined new tax relief for R&D spending and research funding for artificial intelligence (AI), among other areas, to encourage home-grown “AI powerhouses”.
The funding was outlined among announcements of sweeping tax cuts for businesses and a reduction of national insurance from 12% to 10% as of January 2024.
To stimulate economic activity in the innovation and research sectors, Hunt announced there would be a “new, simplified” system of tax relief for R&D.
This new structure will combine current R&D Expenditure Credit and SME schemes and reduce tax rates for loss-making companies. Previously taxed 25%, this rate will be cut to 19%.
The current full-expensing scheme, which replaced the 130% super-deduction, has also been made permanent. It was previously set to expire in 2026.
Read more: UK to replace 130% super-deduction with ‘full expensing’ tax break
Full-expensing enables companies to write off the cost of spending on certain types of new machinery and equipment and save 25p with every one pound invested elsewhere.
Other key investments include £4.5bn for manufacturing, £1m to aerospace companies and a new “investment zone” in Wrexham, Wales.
Three others will also be established in England in Greater Manchester and the west and east Midlands.
Jonathan Boakes, managing director of digital products and services firm Infinum, said: “The UK government’s allocation of £500m for AI powerhouses and a 25% tax deduction on IT expenditure shows strong support for tech innovation. But, there’s huge concern that this investment might not be used wisely.
“Research shows 78% of UK businesses plan to invest in AI in the next year, but 73% feel unprepared for its integration. Success in the AI revolution demands more than just plugging gaps with cash.
“It requires strategic planning, workforce training, and expert collaboration to maximise the impact and prevent implementing AI for AI’s sake. The rush to embrace AI carries the risk of hasty decisions fueled by FOMO, jeopardising sound judgment.
“While the financial boost is appreciated, it must come with clear guidelines and support from the Government to empower businesses in utilising it effectively.”
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