Brown scraps Home Computing tax breaks

Chancellor of the Exchequer Gordon Brown has scrapped the tax breaks for businesses that loan PCs to employees in his 10th budget.

From 6 April 2006 businesses that loan PCs to their staff for personal use at home will face a tax charge of up to £200 per employee as well as national insurance.

The change effectively kills the government's Home Computing Initiative (HCI) which had allowed companies to loan PCs to staff as a tax-free benefit, with the fee deducted from their salary each month.

Any HCI schemes started before 6 April 2006 will not be subject to the new tax rules and will still be able to claim it as a tax break.

A spokeswoman for the Department of Trade and Industry (DTI) which initially launched the HCI scheme, said it was always agreed it would be kept under review and that the Treasury had decided it was not the best way to get people using PCs.

She told silicon.com: "The government now wants to target groups such as the unemployed and the elderly."

In an otherwise poor budget for the IT industry, Brown relaxed the R&D tax credit threshold for small and medium-sized enterprises (SMEs). He raised the headcount threshold for the size of business eligible for the SME R&D tax credit from 250 to 500 employees.

The move has been welcomed by UK IT industry trade group Intellect, which said it will particularly benefit fast-growing software companies.

Tom Wills-Sandford, deputy director-general of Intellect, said: "At the moment, businesses which grow over the headcount threshold face a significant loss in benefit, often at a time when the cash is still vital to their ability to grow. The changes announced today will make a significant difference to innovative businesses in the UK."

There was nothing else for the IT industry in Brown's budget, which mainly focused on increased funding for schools, taxes on gas-guzzling 4x4 vehicles and money for the 2012 Olympics.