Time to secure the future of Scotland's tech sector

Time to secure the future of Scotland's tech sector

In the field of research and development, Scotland continues to lead the way. Figures from Scotland Development International reveal that - per head of population - we're carrying out more research than anywhere else in the UK.

Both the Scottish and UK Governments have championed innovation and provided some truly valuable support to the flourishing technology and life sciences sector. But, while there is much to celebrate, we should never get complacent.

At the heart of the technology industry in Scotland is a hive of hundreds of start-ups – businesses thirsty for rapid growth and a competitive edge in a global market. While that enthusiasm should be applauded, the drive for growth can come at the expense of profits, as early life businesses dig deep into their own pockets, as well as the pockets of their investors,  to invest in research and development in an attempt to take them to the next level.

In addition to the much lauded Research & Development Tax Relief, introduced more than a decade ago, great strides have been taken in Scotland to create a community that it is genuinely favourable to early stage technology companies. Targeted support, such as the Video Games Tax Relief, introduced in 2014, is helping to grow a sector that already employs more than 9,000 highly skilled, educated, tech-savvy people.

In some cases the relief can save some firms thousands of pounds, enabling them to re-invest in innovation. Meanwhile, the Patent Box encourages companies to maximise returns by reducing the corporation tax they pay on profits generated from qualifying IP.

A welcoming environment and a culture of support have helped to position Scotland as one of the top choices for start-up firms and investors looking for the next global success story. But, despite the positive mood, some key challenges remain, including tax complexity.

The current UK tax code is around 18,000 pages long, with complex, bureaucratic and sometimes out-dated legislation and rules. It simply isn't fit for the digital era and clashes with fast moving, rapidly evolving sectors like technology.

The digital era is here and now, more than ever, is the right time to take a closer look at establishing a simpler, more transparent tax system which complements the positive initial steps already taken in the form of R&D support.

We're heading in the right direction and have much to be proud of, but further steps could and should be taken to secure a more sustainable, long term future for a technology sector at the heart of Scotland's vibrant economy. 

Andrew Holloway is head of technology & emerging markets in Scotland for Grant Thornton.