Chancellor axes Home Computer Initiative

By Steve Malone

Posted on 23 Mar 2006 at 10:32

In his budget yesterday, the Chancellor of the Exchequer Gordon Brown killed off the Home Computer Initiative. From 6 April companies who lend computers to their staff will have to pay up to £200 per employee as well as the National Insurance payment.

Introduced in 1999, the Home Computer Initiative was originally designed to encourage employees to get computers at home, improve their IT skills and, as a by-product, encourage the development of telecommuting. Employers were allowed to 'loan' computers to their staff as a tax-free benefit although some employers charged a fee deducted from salaries to cover the cost of the scheme. In effect, the taxman was subsidising the purchase of home computer equipment at up to 40 per cent.

The removal of the tax break will come as a blow to many UK hardware companies including Mesh and Evesham who operated special HCI schemes for companies by providing the kit as well as handling the administration.

There is still time for companies to qualify for the HCI tax break. As the new rules do not come into effect until April, any loans starting now will not be penalised by the new tax.

Elsewhere, there was little else of note for the technology sector in the budget.

Gordon Brown did raise the employee threshold for companies to be able to qualify for the R&D tax credit threshold (for small and medium-sized enterprises). Previously, to qualify for the tax credit companies had to have a maximum of 250 employees. Many companies had complained that the figure was too low and was putting a brake on their expansion plans. The threshold has now been raised to 500 employees.

Digby Jones the Director General of the CBI commented, 'The extension of more generous R&D tax credits to firms of up to 500 staff will provide a real boost for innovation among growing enterprises. This is vital as the UK moves towards an increasingly value-added economy under the pressure of globalisation. That said, the process would still benefit from simplification'.