Address tax and IT skills gap, Brown urged

The IT industry is looking to Chancellor Gordon Brown to introduce incentives for ebusiness and skills training in today’s...

The IT industry is looking to Chancellor Gordon Brown to introduce incentives for ebusiness and skills training in today’s budget.

Companies are looking for action to resolve problems in these areas in what is expected to be the last budget before a general election.

The Computing Services and Software Association wants Brown to clarify the tax write-offs, launched last year for small businesses to invest in ebusiness capabilities.

CSSA director of industry affairs Tim Conway said: “These cover servers and software, but we want to know if they include areas like broadband communications which aren’t specifically mentioned in the details.” Conway added the IT skills gap also needed to be addressed more directly than was currently possible.

“Employers get a basic deduction, but not a real incentive to shift investment into training rather than other areas,” Conway added.

The CSSA is calling for reforms to the arrangements for share options which limit the amount that can be received free of tax and the number of people who may receive the options untaxed.

Brown paid some attention to this last year, but employees must still pay national insurance when they sell shares from some schemes. Conway pointed out that that these people pay more tax than ordinary investors.

“We have one of the best approved share option schemes in the world, but also one of the worst unapproved schemes,” Conway believed.

In a pre-budget statement, David Weymouth, chief information officer at Barclays called on the Chancellor to reduce VAT on IT goods and services. As a financial services company the bank is unable to claim back VAT and this has a strong influence on its purchasing decisions.

Weymouth said the Chancellor should consider the introduction of a capital gains tax exemption for long-term investments in the technology industry. He also called for a widening of the eligibility for tax relief on research and development.

Tax relief is available for scientific research but eligibility should be widened to include tax relief on development expenditure, Weymouth said.

The Institute of Directors (IoD) wants the chancellor to simplify the tax system. It describes the working families tax credit as a “payroll nightmare for smaller businesses”.

The IoD has also asked the Chancellor to drop the proposed employment tax credit due in 2003, which would involve more businesses in burdensome payroll exercises.

Ruth Lea, head of the IoD’s policy unit, said, "The tax system is now just about incomprehensible to all but the most dedicated tax experts and the regulatory burden is strangling business, especially small businesses. There is a desperate need for a simpler tax system with fewer taxes and less red tape.”

Brendan Burns, vice chairman of the Federation of Small Businesses, said red tape is too heavy a burden for his members.

“Small businesses should be able to withold a percentage of the tax they collect. The cost of dealing with VAT and national insurance is horrendous,” he said.

Self-employed workers such as consultants should be taxed in the same way as businesses, said Burns. Although the computing industry was facing huge problems, consultants were among the hardest hit.

“The self-employed get taxed only at the top rate. They can’t take advantage of the benefits that companies get, say for training. They should be allowed to take benefits without having to follow the rules for declaration,” he said.

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