Chancellor offers some hope to beleaguered tech sector

Some tax breaks for tech businesses promised by budget

First impressions suggest the Chancellor, Gordon Brown, has smiled kindly on tech companies as his budget offers tax relief in a variety of forms.

The Chancellor proposes to offer tax relief on firms' intellectual property, or 'IP', which is likely to apply to trademarks, patents and the value of IP when a firm is sold, although details are yet to be announced. The crucial aspect of this lies not in the detail but in the Chancellor's acknowledgement that IP is a hugely valuable part of a new economy business. Some experts suggest that IP will soon replace physical assets as the main means of assessing a company's worth.

VAT for small businesses earning up to £54,000 per year will be abolished and for slightly larger businesses a flat rate will be charged. Tax systems will also be simplified to make them easier for small businesses to understand.

As in previous budgets, the Chancellor will put more money directly in the hands of Headteachers -- with primary school heads to receive £13,000 and their larger school colleagues receiving £63,000. Headteachers of every secondary school will receive for the smaller schools £68,000 and larger schools £115,000. As most schools are keen to purchase more computers and software, and are known to be trying hard to improve their Internet connections and school networks, the tech sector is well placed to benefit from this additional funding to schools.

Larger companies will benefit from tax relief on research and development, which is crucial to the success of most tech companies. The 100% tax relief for investrment in environmental techology, could also be a boost for the tech sector, which is already keen to be green and will doubtless look to exploit the opportunity that this tax break represents.

There will also be tax breaks for companies wishing to offer employees shares although the Chancellor has decided not to scrap national insurance on share options as hoped for by many industry pundits.

All in all it is a positive budget for the tech industry says Andrew Bell, a tax partner with PricewaterhouseCoopers. He notes however that the Chancellor backed down from the digital economy rhetoric he has used in previous budget speeches. While businesses have benefitted there is little there for consumers. "I didn't hear anything that would particularly encourage people to get on the Internet," he says.

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