Shock removal of tax exemption on home computers

Yesterdayís budget saw a shock announcement from the Chancellor, Gordon Brown regarding the tax exemption on home computers and mobile phones.

The move means that the current tax exemptions for employer-provided computer equipment will be removed from 6 April 2006 and that the tax exemption for mobile phones is being ìrefocusedî.

Mr Brown claimed the reason behind the move was: ìMany employees have benefited from the tax exemption to get a computer into their homes, but the Government now wishes to focus support on groups with the poorest access to technology, to meet the goals set out in the Digital Strategy.î

The tax relief on computers was introduced in 1999 as part of the government’s attempt to improve the nationís IT skills and use of the internet. However, the number of employers implementing the scheme begun to spiral after January 2004 when the government launched its Home Computing Initiative (HCI) making it the fastest growing employee benefit in the UK, according to the HCI Alliance.

The announcement came as bolt from the blue to the HCI and employee benefits industry who had made significant investment in promoting the benefit under the impression that the scheme had a five year window from 2004.

Michael Whitfield, Managing Director of thomsons online benefits comments: ìThis news came as a complete shock, not only to us but the entire employee benefits market. Not least because of the number of HCI schemes currently being implemented by government departments!î

ìOur latest research Employee Rewards Watch 2006 showed that a third of employers had already implemented HCI with another third planning to do so this year. Many of the companies who were planning to implement this year do come from the more traditional industries with the kind of employee base the government is looking to target. Clearly this move will have a big impact on the future growth of salary sacrifice schemesî.