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Boost for R&D, but tax relief does not go far enough

Although industry groups and IT professionals broadly welcomed the Budget, some claimed that new measures do not go far enough.

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Although industry groups and IT professionals broadly welcomed the Budget, some claimed that new measures do not go far enough.

The Computing Services and Software Association (CSSA) typified the mixed reaction. It said the Government's consideration of a tax credit to reward research and development would help to foster growth among the technology companies, and tax relief for intellectual property would bolster confidence among emerging high-tech companies.

"We need to make investment in training by both employers and employees attractive and a tax incentive looks like the best way of doing this," said John Higgins, director general of the CSSA.

But the CSSA criticised the Government for not extending tax relief further on share option schemes. "Continuing the national insurance on share options inhibits the development of the knowledge economy and unfairly taxes the hard-working," Conway said.

IT directors praised government proposals to introduce relief on intellectual property and other intangible assets.

"Bringing intellectual property and goodwill into the tax system will indirectly benefit UK IT departments as it makes the IT sector more competitive," said Roger Marshall of the Elite Group.

"We have seen a number of UK companies, particularly in the retail sector, held back before investing in e-commerce start-ups."

But the Budget was not able to banish one storm cloud hanging over the IT sector - the IR35 tax regulations.

The Professional Contractors Group, which is challenging IR35 in the High Court this week, said, "There is little point in the chancellor making token gestures towards small businesses when many of those small businesses will have either closed down or moved overseas."

This was first published in March 2001

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