The tax credit, offering increased rewards for innovation, was announced by chancellor Gordon Brown in his budget speech.
Roger Marshall of the Elite group of IT directors, said, "Bringing intellectual property and goodwill into the tax system will indirectly benefit UK IT departments as it makes the IT sector more competitive. We've seen a number of UK companies, particularly in the retail sector, hold back before investing in e-commerce startups."
David Taylor of IT director's body Certus, said, "I have spoken to a number of IT directors prior to the budget and this is something that they would definitely welcome as it makes the decision to acquire a dotcom much more justifiable in financial and business terms."
However, Marshall was skeptical of the value of proposals to simplify VAT for small businesses. "The proposals to streamline the VAT system will not go far enough to nullify the effects of the IR35 proposals on IT contractors. This issue is the one that has annoyed the IT industry the most and we would still like the Government to drop these proposals," he said.
The Computing Services and Software Association has condemned the chancellor for not taking enough action to make share options 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."
He claimed the CSSA believes that this discriminates between workers, taxed at 47%, and financial investors, who pay only 40% for the same shares and added, "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 who 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," Burns said.
This was first published in March 2001