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Government pulls support for Home Computing Initiative

The IT industry and KPMG are aghast that Gordon Brown has withdrawn a tax break that helped companies to bridge the digital divide
Written by Graeme Wearden, Contributor

The government is withdrawing financial subsidies that have encouraged the take-up of home computers by UK employees.

In his budget speech on Wednesday, Chancellor Gordon Brown announced that the tax exemptions offered within the Home Computing Initiative would be withdrawn next month. A similar tax exemption for firms who supply more than one phone to an employee is also being dropped.

"Many employees have benefited from the tax exemption to get a computer into their homes, but the Government now wishes to focus support on groups with the poorest access to technology, to meet the goals set out in the Digital Strategy," said Brown in the Budget report published on Wednesday afternoon.

"As a result, the Govenment [sic] has decided to remove the current tax exemptions for employer-provided computer equipment, from 6 April 2006. The tax exemption for mobile phones is also being refocused to ensure it delivers on its objectives."

The Home Computing Initiative allow employers to loan computing equipment to their employees for personal use at home as a tax-free benefit. Under the terms of the schemes, staff are able to lease new PCs with a fee deducted from their salary each month.

The Initiative, introduced in 1999, was meant to increase the take-up of PCs by the UK population, by making it cheaper to own one. Although its initial take-up was disappointing, it did improve recently — just last week BT said it had loaned 30,000 PCs to its staff.

Ian Hopkinson, partner at accountancy firm KPMG, said that the removal of the tax exemption was unexpected, difficult to understand and would bring real practical problems for employers.

"It also applies to the provision of more than one mobile phone, signalling an end to employers offering both a mobile and a Blackberry to staff. In future, companies are likely to force staff to use just one mobile device. This will clearly have a knock-on effect for handset providers," said Hopkinson.

"April is a popular time for employers to launch flexible benefits arrangements. This means that they will now have been through employee elections and possibly finalised contracts for the provision of computer equipment. The removal of the exemption is for computers not made available before 6 April and, as it is highly unlikely that physical delivery of kit can be made before then, it puts employees and employers in an uncertain and potentially expensive predicament".

Intellect, the high-tech industry association, was also upset by the abolition of the Home Computing Initiative.

"Intellect is dismayed by the announcement in today's budget. The Treasury should have taken the opportunity to engage in a formal consultation process to fully assess the benefits of this scheme," said Tom Wills-Sandford, deputy director general of Intellect, in a statement.

"The Home Computing Initiative is one of a series of important measures in place under the banner of the Government's Digital Strategy, which helps tackle the digital divide for employees on lower incomes. To date, the initiative has successfully driven uptake of home computers and has played a useful role in widening digital inclusion," Wills-Stanford added.

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