Brown unveils the e-budget

Tax cuts, more relaxed IT work permit regulations, other measures aim to make Britain entrepreneur-friendly. Is it enough?
Written by Matthew Broersma, Contributor on

Chancellor Gordon Brown Tuesday announced a tax-relief package aimed at encouraging Internet startups, as well as a number of measures aimed at stimulating UK business and entrepreneurship in the IT sector.

The most significant moves, from the point of view of small startups looking to reward employees with potentially valuable stock options in lieu of high salaries, are reductions in the taxes levied on those options. Brown said up to 15 key employees will be able to receive tax-friendly share options of up to £100,000 in value, up from the 10 employee limit he put forward in November's pre-budget statement.

All shareholders will be subject to a lower 10 percent capital gains tax rate.

"Our measures are the biggest boost for employee shareholding our country has seen," the Chancellor said.

Industry observers were more lukewarm, noting that most of the measures had been pre-announced, but the consensus seemed to be the government's moves are a step in the right direction. "It helps," said Mark Simon, founder and CEO of thechemistry.com, which organises high-tech investment networking events. "It's helping us to get that US startup culture over here, and anything that does that is for the best."

Brown said he will cut capital gains rates for business assets. From 40 percent, new rates will be cut to 35 percent after one year, 30 percent after two years, 20 percent after three years and 10 percent after four years. The change takes effect 6 April.

Business investors who own 5 to 25 percent of a new and growing business will now be able to take advantage of a 10 percent tax rate for investments held for four or more years. For unquoted companies, all investments held for four years will get the 10 percent rate.

"Britain is now the place for companies to start, to invest, to grow and to expand," Brown said.

As an inducement toward the goal of getting one million small companies to go online, Brown will introduce a special tax reduction for IT equipment. For the next three years, any small business will receive a full tax writeoff on IT-related purchases.

The government also plans to relax work permit rules for highly-skilled IT workers.

Brown announced a £100 tax cut for those filing tax and VAT returns over the Internet, touting it as a step to promote the Internet and e-commerce. Those paying the working families tax credit will get a further £50 tax cut.

If Gordon Brown has got his e-commerce friendly Budget right, every person reading this will shortly be contributing to the online revolution. Go with Tony Westbrook to read the news comment.

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