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Marks out of ten for the Chancellor

We revisit PwC's ten Budget tips and see how they stand now

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Earlier this week The Register published PricewaterhouseCoopers' (PwC) Ten Top Tips for the Chancellor ahead of yesterday's Budget. There was lots of talk in the wake of Gordon Brown's speech of the boost to the UK e-conomy, but just how did it stand up against PwC's list of recommendations? Ian McDade, tax partner at the PwC technology group, talked to The Register today to award the Chancellor marks out of ten. Out of the list of ten, the Chancellor scored a paltry four from McDade, who described yesterday's speech as: "An interesting Budget." Singled out as the "biggest disappointment of the Budget", the failure to deal positively with the issue of employers' liability on national insurance contributions. "There had been a lot of lobbying on this issue," McDade said. "All that was said though is that there will be consultation on this issue. This will continue to be a major problem for IT companies." Out of PwC's list of ten recommendations, the following were put forward in the Budget:

  • Change the rate on Business Assets for Capital Gains Tax purposes so that the new five-year taper to ten per cent applies to all shareholdings where the holder works in the company. McDade's reaction: "The Chancellor has gone beyond our recommendation – he gets a star for recognising Capital Gains Tax has a penalising effect."
  • Widen the eligibility tax relief on research and development (R&D). Currently,100 per cent tax relief is available for "scientific research" but this has a very narrow definition for example it does not include development expenditure. McDade's reaction: "At the moment there is no definition of what R&D is, now there will at least be some clarity to this issue."
  • Introduce a share arrangement to enable technology companies to reward employees with shares that would be free from tax, provided they are held long-term. McDade's reaction: "On this point, he's done an OK job. We were looking for a total revision of the schemes, instead he's confirmed the existing schemes will be allowed to sit alongside a new one.
  • Broaden the scope of the new Enterprise Management Incentive system. McDade's reaction: "The number of key employees that can be given £100,000 share options is now 15, but this is little more than a gesture. For IT companies, £100,000 is not a huge amount of money over a long period. Maybe he should have extended it to all employees."
  • The issue of IR35 remains a hot potato in the IT sector. It was not a part of yesterday's Budget, nor was it expected to be. On the subject of IR35, McDade said: "There was nothing in the Budget regarding IR35. People are going to be stuck with the changes as they stand." ® Register Budget 2000 coverage Ten things we'd like to see in the Budget – PwC UK Budget gives IT shot in arm Tune in and turn on to Cash Register, for more tales of the Bubble Economy

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