Cautious welcome for Budget from IT professionals

IT professionals and suppliers have given the Budget a cautious welcome.

IT professionals and suppliers have given the Budget a cautious welcome.

Chancellor Gordon Brown highlighted the importance of IT investment at the heart of the UK economy and also announced enhanced tax incentives for research and development.

The type of expenditure qualifying for R&D tax relief will be expanded to cover software, while the Department of Trade and Industry has published new guidance to clarify the definition of R&D.

Capital allowances for SMEs investing in equipment, including software and hardware, were also extended from 40-50%.

Elsewhere, Brown placed IT at the heart of government efforts to modernise public services and help achieve billions of pounds in efficiency savings.

The findings of a year-long efficiency review led by Peter Gershon, head of the Treasury’s Office of Government Commerce into how new technology can make government procurement more efficient, will be revealed in the government’s spending review in the summer, Brown added.

John Oughton was also announced as the new chief executive of the Office of Government Commerce

Philip Virgo, strategic adviser to the Institute for the Management of Information Systems, said Brown’s reference to the Gershon review in the statement was a turning point for the role of IT within UK government and the economy.

"This is the first budget where the whole of the delivery is critically dependent on ICT to deliver," he said. "The rest of the stuff is small beer."

Andrew Bell, technology industry leader at professional services firm PricewaterhouseCoopers, said changes to the definition of R&D would help company IT investment qualify for tax relief.

"The new R&D definition says software enhancements don’t have to be earth shattering but do have to show an advancement," he said. "In our experience, lots of companies, particularly small ones, have been put off claiming for R&D tax relief."

But Brown’s tax incentives were dismissed as too cautious by others in the IT industry.

Intellect, the trade association for the UK IT, Telecoms and Electronics Industry, has expressed its disappointment that the chancellor had failed to increase the effective R&D tax credit rate, claiming that it still failed to act as a real incentive.

"This Budget has left us seriously concerned about the outlook for the UK as a base for research and development and innovation," said Tom Wills-Sandford, Intellect’s Director of Campaigns.

However, Intellect welcomed the chancellor’s plan to produce improved guidance in support of the tax credits.

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