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updated 10:55 PM BST, Apr 23, 2015
Technology and life sciences news from the Cambridge cluster

UK tax regime blamed as Raspberry Pi device manufacture kicks off overseas

Raspberry Pi logoIt seems it isn't only computer science that Raspberry Pi wants to shake up. The announcement that mass production of its first extremely low-cost computers had begun was accompanied with a broadside fired at a tax policy it says hurts the UK economy by rewarding overseas manufacturing.

The Raspberry Pi Foundation web site was temporarily downed as servers struggled to cope under the strain of traffic when fans flocked to read the news that production was underway. The Cambridge-based charity is developing computers, essentially credit-card sized circuit boards running open source software, for $25 (£16) and $35 (£22) and has amassed a highly excitable following ever since David Braben, one of the Foundation's trustees, revealed how it hoped this new device could inspire a new generation of computer scientists.

Its mission to promote computer science from a young age is finding other like-minded allies from the UK government, to national press and new entrepreneurial ventures.

It has over 50,000 people on its email list and a staggered auction of 10 numbered pre-release boards has already raised over £10,600 with one board donated to the soon to be Cambridge-based computer museum and at least another £5,500 expected from the final two.

Working within a very tight budget, the intention was to acquire components overseas and build the devices in the UK. However, Raspberry Pi found UK manufacturers were unable to meet both the price point and unit numbers required to make this feasible. The greatest barrier of all though, according to Liz Upton who made the announcement, was in the form of HM Revenue and Customs.

The Raspberry Pi web site was immediately inundated with comments from those overjoyed at news of production, yet disappointed that it would take place in the Far East.

"Simply put, if we build the Raspberry Pi in Britain, we have to pay a lot more tax," said Upton on the charity's web site. "If a British company imports components, it has to pay tax on those (and most components are not made in the UK). If, however, a completed device is made abroad and imported into the UK – with all of those components soldered onto it – it does not attract any import duty at all."

The problem is in fact one that affects all members of the European Union as UK and EU import rates are harmonised into one combined tariff. Either way, the upshot is, as Upton points out, major tax inefficiencies for electronics companies wanting to manufacture in Britain and one of the reasons that so much of it goes overseas.

"Right now, the way things stand means that a company doing its manufacturing abroad, depriving the UK economy, gets a tax break. It's an absolutely mad way for the Inland Revenue to be running things and it's an issue we've taken up with the Department for Business, Innovation and Skills."

Diagram of Raspberry Pi boardUpton said a UK facility that would take three months rather than three weeks to produce the necessary numbers was still $5 behind the Far East on margin.

"When you're talking about tens of thousands of units per batch, losing that sum of money for the charity – a sum that we can spend on more manufacture, more outreach work and more research and development – just to be able to say we'd kept all the work in one country, starts to look irresponsible," said Upton.

The first batch of 10,000 devices will instead be manufactured in Taiwan and China. All will be the slightly higher spec $35 Model B version, which Raspberry Pi believes will be the bigger seller of the two.

The Model A device which is expected to be less popular than Model B may yet be built in the UK though as one of the main issues with manufacturing here, that companies offering a price that didn't completely wipe out the Raspberry Pi margin couldn't reach the necessary numbers, is eliminated.