Budget day: Brown delivers budget for the new economy

UK Chancellor Gordon Brown told the Commons he delivered a Budget built on the realities of the new economy this afternoon, with several measures to boost the UK's IT industry.

In his fourth Budget, completed at 4:22pm this afternoon, the Chancellor produced moves offering quick tax write-offs on investment in IT and ecommerce, new rules on work permits for IT staff from abroad, reduced capital gains tax, and broadened access to share option schemes.

"I want to see Britain as the best place for ecommerce, and up with the United States as soon as possible," the Chancellor told the House of Commons.

Experts were, however, disappointed that the issue of employers national insurance contributions on share option schemes has been sent out for consultation, rather than dealt with immediately.

"We're a bit disappointed that he's decided to consult," said John Higgins, director general of the CSSA. "This is hindering us."

Max Thowless-Reeves, analyst for Richard Holway Ltd, said: "This is in dire need of reviewing."

Employers national insurance liability has no ceiling, meaning that costs can soar if the value of a staffers' share-options does likewise damaging growing companies, according to the IT industry.

However, Higgins said Brown's Budget deserves seven out of 10, as these problems were offset by a number of IT-related proposals. The clearest recognition of IT's importance came in a special tax deal on ecommerce or IT, under which small and medium-sized companies will be able to write off 100 per cent of their expenditure against tax in the same financial year.

Normally, tax write-offs on equipment take place over four years, with only 25 per cent of the spending being set against company profits in the first year. "This could be positive, but it depends on the scope," said Holway's Thowless-Reeves, adding that if this was just on PC purchasing, it would be of limited use.

The Chancellor also announced there will be new rules on work-permits for certain technology skillsets. This is likely to alter the rule under which jobs must be advertised in the UK and European Union to prove no local worker is available before a work-permit can be issued for an non-EU citizen, and should speed up international appointments.

On share option schemes, Brown said the tax rate will be cut to 10 per cent. Furthermore, the employee share option scheme known as the Enterprise Management Incentive will be extended from 10 to 15 staff. "This is good stuff," said Patrick Stevens, tax partner at Ernst & Young.

The main drawback on the EMI scheme is that companies have to remain unquoted and within qualifying trades to qualify.

In moves aimed at all fast-growing businesses, capital gains tax (CGT) tapering designed to get investors to put long-term money into small businesses is being extended, as it was last year. From 6 April, CGT will fall from 40 per cent to 35 per cent after one year of an investment being held; 30 per cent after two years; 20 per cent after three years; and 10 per cent after four years, meaning investors who leave their cash in for this time will get to keep 90 per cent of profits on their stake.

Furthermore, investors who own just five per cent of a firm will be able to take advantage of tapering, whereas previously the tapering scheme was only available to those owning a quarter or more of a company.

Finally, Brown had good news for all firms that can operate information technology competently enough to file tax and VAT returns over the web - this will save you £100.