Tax relief on intellectual property and goodwill could make the
acquisition of IT companies easier, following announcements by
Chancellor Gordon Brown in yesterday’s budget.
Andrew Bell, technology industry tax partner at the
PriceWaterhouseCoopers global technology group, said the tax relief
was one of two key measures which would affect the technology
industry – the other being an extension of tax credits for research
and development.
“The Chancellor has promised to bring tax relief on intellectual
property and goodwill in line with the UK’s main competitors by
allowing intangibles to depreciate on the same basis as capital
expenditure. This will have important effects on software companies
and e-businesses,” Bell believed.
“A lot of these companies’ capital is tied up in the
intangibles. Therefore, these measures will benefit IT companies
interested in buying up fledgling ecommerce startups, and it should
also make software companies more attractive to foreign companies
as possible acquisitions.”
Bell welcomed the chancellor’s proposal to extend research and
development credits to all companies rather than just small
businesses but he cautioned, “He has waved the carrot, but there
are no guarantees yet. We expect to see the fine print of this in
the next few weeks.”
Bell said that overall the budget was unexciting. “Many people
in the IT industry will be disappointed that the chancellor did not
go far in improving the conditions for business and the IT industry
in particular,” he said.
But the Computing Services And Software Association has
condemned the chancellor for not taking enough action to make share
actions more attractive to employees.
Director of industry affairs Tim Conway, said, “Although the
CSSA welcomes an extension of tax relief on share options, there
are still strict limits on the size of these schemes.
This means many employees will still pay national insurance on
shares they sell. The CSSA believes this discriminates between
workers who are taxed at 47% while financial investors with the
same shares pay only 40%. It is easy to set in place rules for how
employees can divest themselves of shares, removing the need for
this extra taxation. We don’t understand why the government is so
stubborn.”
The CSSA welcomed the chancellor’s announcement that he would
consult on a potential tax credit for training. “There is clearly
underinvestment in training. Because it’s up to employers and
individuals to address the skills gap, we believe a tax credit is
the best way to encourage training,” said Conway.
Brendan Burns, vice chairman of the Federation of Small
Businesses, said “All the chancellor’s measures to help small
businesses referred to companies and not the self-employed that
need just as much support. 80% of the businesses he is supposed to
help are the self-employed.
The chancellor talked several times about entrepreneurs, but
when it came to the nitty-gritty he meant companies. The
self-employed are rapidly becoming a new unseen poverty group.”