Hang on to your old computer!
As is his wont, the Chancellor of the Exchequer included a nasty sting in the tail of the 2006 Budget. Something no one was expecting.
And this sting became law as a result of the new 2006 Finance Act. So now the
- Home Computing Initiative (HCI) has been axed with effect from last April.
Under this scheme – introduced in 1999 – an employer could provide (that is, loan) a computer to an employee, and no benefit-in-kind tax charge would arise upon him/her. That was so even if, as almost invariably happened, the employee used the computer for non-business purposes. And this tax exemption was given no matter how great the non-business use was. The only limitation was that the value of the computer, together with any associated equipment, amounted to no more than £2,500.
Now, all of a sudden, that tax exemption has gone.
Mean or what? The reason given is that the Government now wishes to focus support on others who, so far, have not been able to benefit from IT incentives – such as the unemployed and the elderly.
Very strange. The HCI support for employees has been withdrawn from 6 April this year, but no “support” for others has yet been introduced. Surprise, surprise! (We may have to wait until 2007 or 2008 for that.)
So, in reality, this just doesn’t add up. Not for the present, anyway. (Some actually have had the temerity to suggest a very different reason: that the Chancellor’s objective is simply to take more from us in tax. Cynics!)
Bad news then. However, there remains just one ray of light. Fading light admittedly, but light nonetheless.
This withdrawal of HCI tax relief
- “does not cause any liability to income tax to arise in respect of computer equipment... if the computer equipment was first made available to (the employee) before 6 April 2006”.
So the message to employers and employees is clear. Forget about moving up to a new computer. Continue to use the old one until it has run into the ground. Whatever you do, don’t keep up to date!
This is not a message that computer manufacturers will want to hear, of course. But if, as a result, their profits take a dip – and the corporation tax they pay therefore takes a dip too – Mr Brown has only himself to blame!
Robert Bond has been a practising chartered accountant for over 20 years.
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