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Will the Budget boost PC-employee scheme?

Graeme Wearden ZDNet.co.uk

Published: 16 Mar 2004 14:20 GMT

The chancellor, Gordon Brown, could be poised to give companies extra incentives to embrace the government's Home Computing Initiative (HCI), according to industry observers.

The scheme gives tax breaks to firms and employees when a PC is loaned to a worker for home use. However, take-up has been disappointing since its introduction in 1999, and this has hindered the government's attempts to boost domestic PC usage.

Wednesday's Budget statement could be an ideal time to give the initiative an extra fillip, according to PricewaterhouseCoopers (PwC), which thinks it highly likely that the HCI will be 'reinforced' this week.

"The Budget could be used as a platform to help raise awareness of HCI and its far-reaching benefits," said Bill Kirwan, PwC tax director. "It's a welcome and cost-effective initiative aimed to encourage computer ownership and Internet take-up in homes and, with the right scheme, both parties can make significant cost savings through tax and national insurance concessions."

HCI, which was launched in the 1999 Finance Act, uses a similar model to that used for company cars in order to encourage companies to offer PCs to their workforce.

Under an HCI scheme, a firm can loan a PC to an employee and recover the cost over time -- typically three years -- through a reduction in the annual gross salary of the employee. Once the leasing period is over, the employee can purchase the computer at a "fair market price" which, given the rapid depreciation in the cost of PCs, is likely to be very low.

This salary sacrifice benefits the employer, which doesn't have to pay national insurance contributions on this amount. The employee also benefits financially, as they have effectively bought a PC using gross income rather than losing some of that income to tax.

Back in October, cabinet office minister Douglas Alexander admitted that take-up of HCI had been limited, and launched a consultation exercise into ways of improving the situation. This resulted in the publication of new guidelines in January this year designed to make the scheme easier to adopt.

Recent figures have shown that the take-up of PCs and Internet connections in the UK is barely growing at all, which is threatening the government's ambition plans to ensure that Britain leads the world in Internet adoption.

If Brown decides that the HCI needs serious help, he could raise the level of the tax-exemption available to companies who offer a HCI from its existing ceiling of £500 per employee per year, or he could attempt to make the scheme easier to use.

The Royal Mail already offers an HCI scheme, which chief executive Adam Crozier recently claimed was "the most popular thing the company had done for its people in the last 10 or 20 years."