Unwelcome changes to the Home Computing Iniative have overshadowed more positive Budget initiatives

Gordon Brown’s budget provision of more research and development tax credits has been overshadowed by a decision to treat home PCs granted through employer schemes as taxable. Coming after the previous advocacy of the Home Computing Initiative (HCI) to encourage firms to offer staff computers at preferential terms, the about-turn angered critics.

Tax-exempt status for the home PCs will end on 5 April although staff who sign up by then will be unaffected. The scheme got off to a slow start but has been hugely successful recently, attracting about 1,250 firms in 2005.

The tax alteration was roundly criticised.

“Intellect is dismayed by the announcement,” said Tom Wills-Sandford, Intellect deputy director general. “The Treasury should have taken the opportunity to engage in a formal consultation process.”

However, Intellect and the Confederation of British Industry (CBI) welcomed the Chancellor’s plans to extend the higher rate for research and development tax credits to companies with a ceiling of 500 staff rather than the previous 250.

CBI director general Digby Jones said the raising of the ceiling was a “real boost for innovation”.

Intellect’s Wills-Sandford said, “This will help small and medium-sized enterprises who originally fell out of this bracket to now benefit. Software companies will particularly benefit, as a large number currently fall in to this category.”

He was supported by Jeremy Roche, chief executive of financial applications developer Coda Group and chairman of the European Software Association.

“We’re increasingly seeing companies that used to develop software in the UK offshoring it,” Roche said.

“Having tax credits helps me explain to my shareholders why the UK is a good place to do the research and development on shore. We don’t want a repeat of what happened to the coal mining industry.”

Sun Microsystems was disappointed in its efforts to persuade the Chancellor to take an eco-friendly approach that would incorporate perks for firms that encourage teleworking.

Richard Barrington, Sun’s global lead for environmental policy, said, “There’s a fair bit of dancing around handbags but nothing that will change the roads being full or the rail network. The government should encourage people to work where they are most productive. This government has to find its courage.”

Sun is not the first technology giant to call on government for action to encourage teleworking but previous requests from firms such as Symantec have received a dusty answer. That has not stopped firms such as BT taking a proactive stance, however, or from flexible working rules having some effect.

“People are concerned about these things and Sun is onto a good thing,” said William Fellows of analyst firm The 451 Group. “If they can establish themselves as thought leaders, then hats off to them.”