Budget 2011: What does it mean for the IT industry?

Tax breaks for entrepreneurs, startups and innovators, and new tech colleges to boost skills

Chancellor George Osborne presented his 2011 Budget earlier today, making several announcements that will directly impact the IT industry.

There was an enormous focus on restructuring the economy for growth in the private sector, and several key announcements were made around reducing and simplifying taxes.

The technology industry will benefit from a corporation tax reduction of two per cent in April, with the rate then due to fall by one per cent per annum over the next three years.

This will result in the UK's corporation tax being lower than both Germany and the US.

To support the Chancellor's plan for growth, £350m worth of business regulation will also be axed.

In addition, Osborne announced plans to establish 21 new enterprise zones for the UK, in areas including Birmingham, London, Manchester and Nottingham.

The zones will benefit from superfast broadband, and a 100 per cent discount on business rates will be offered to firms in these areas for up to five years.

In a boost for IT entrepreneurs and start-ups, the Chancellor doubled entrepreneurs relief from Capital Gains Tax from £5m to £10m as of 6 April this year, and launched a scheme dubbed "Start-up Britain", which aims to help people start and grow a business.

With regard to skills, Osborne announced plans to establish at least 24 new university technical colleges by 2014. These will be formed through partnerships between universities, colleges and businesses, and will provide technical training opportunities for 11 to 19 year olds. The sponsors will help set up curricula to match the needs of the local economy and their sectors.

It is expected that the technical colleges will provide work experience placements for students with employers, especially firms in the IT sector.

Osborne argued that the UK needs a more skilled and flexible workforce, as we currently fall behind the US and Germany on this front.

To turn this around, the government will provide £180m to support 50,000 additional apprenticeships over the next four years, as well as 100,000 work experience placements.

On innovation and research, Osborne committed to protecting the science budget, and also confirmed £100m of new capital funding in 2011-12 for science and innovation campuses.

In addition, the government committed to increasing tax credits for research and development. From this April, the amount of research and development spending that firms get back will increase from 15p in the pound to 20p, with an increase to 22.5p next April.

This move was a result of a report from the government's innovation adviser James Dyson, according to Osborne.

The government also reiterated its commitment to launching the first Technology and Innovation Centre in high value manufacturing.

This will integrate the activities of a number of existing centres in Rotherham, Coventry, Strathclyde, Sedgefield, Redcar and Bristol.

Green technology also got a significant mention, where the government intends to introduce a relief for carbon capture and storage (CCS), and combined heat and power. It aims to provide public funding for CCS demonstration plants, and will also not proceed with the current CCS levy.

Osborne also alluded to protecting the digital and creative industries through the protection of the intellectual property (IP) regime.

This is in line with the current independent IP review being carried out by Ian Hargreaves, which aims to establish how the current system can better drive growth and innovation.