Spring Budget 2023: What Tech Companies Need to Know

Orrick, Herrington & Sutcliffe LLP

Orrick, Herrington & Sutcliffe LLP

On 15 March 2023, the Chancellor of the Exchequer delivered his Spring Budget, announcing a number of changes to tax measures and employee share schemes. Here are the key takeaways of particular relevance to our growth clients and the UK tech sector.

  • Enterprise Management Incentives (EMI) option administration changes:
    • From April 2023, the need to set out details of share restrictions within the option agreement will be removed.
    • From April 2024, the deadline for a company to notify HMRC of the grant of an EMI option will be extended from 92 days following grant to the 6 July following the end of the tax year.
    • These are welcome changes which, once implemented, should streamline the EMI grant process.
  • All-employee plan Call for Evidence announced:
    • A Call for Evidence on the Share Incentive Plan (“SIP”) and Save As You Earn (“SAYE”) employee share schemes has been announced.
    • The Government will use the Call for Evidence to consider opportunities to improve and simplify the schemes.
    • Orrick will be inputting into this to advocate for simplification in order to make these schemes more accessible to our growth clients.
  • Research & Development (R&D) tax relief:
    • A new higher rate of R&D tax relief for loss-making SMEs is to be introduced from 1 April 2023, such that SMEs which spend over 40% of their expenditure on qualifying R&D expenditure can qualify for a higher payable credit of £27 for every £100 of R&D investment.
    • This is welcome news for the UK’s startup tech sector and other early-stage businesses with significant R&D expenditure.
    • Separately, no decision has yet been made on the possible merging of the RDEC and SME R&D regimes, and the government is keeping open the possibility of introducing a merged scheme from April 2024.
  • Seed Enterprise Investment Scheme (SEIS):
    • Consistent with previous announcements, with effect from 6 April 2023, certain changes are to be made to the SEIS regime to make the regime more generous:
      • the company investment limit is set to increase from £150,000 to £250,000;
      • the limit at the date of share issue on a company’s “gross assets” is set to increase from £200,000 to £350,000; and
      • the age limit of a company’s “new qualifying trade” is set to increase from 2 years to 3 years.
    • The annual investment limit on which investors may claim income tax and CGT re-investment relief is set to increase from £100,000 to £200,000.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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