Gordon Brown?s budget will deliver a tax break to companies allowing them to write off the costs of fighting their Year 2000 battle in perpetration for EMU conversion costs and reprogramming for the date change.
Spending on remedial software, and on outside project teams to ensure that existing systems are adapted for the millennium will come under revenue rather than capital expenditure according to an article that will appear in the April edition of Tax Bulletin.
This effectively means that any spending will be fully recoverable against corporation tax or income tax in the year it occurred. Until now it has been treated as long-term capital cost, and had to be written off against tax gradually over a number of years.
However, traditional information-technology capital expenditure will still be considered a capital cost, so companies cannot go out and buy new millennium compliant computers to replace their legacy systems and expect to benefit from the break.
The Treasury?s concession to the strain incurred by companies dealing with the date change comes after determined campaigning by Lord Cope, a former Tory Treasury minister, presently a director of Prove It 2000, a provider of millennium-bug solutions.
He said: ?Something had to be done to encourage companies to act on the millennium bug - and money talks. This issue is really time sensitive and the tax break is a carrot to act now although it encourages companies to take remedial action, rather than allowing them to bring in new capital.?
On the question of too little, too late, Cope said: ?With hindsight, it is clear that more should have been done by the government to make the industry face up to its responsibilities. For example, there has been dithering over what is an official standard for millennium compliancy. It is not impossible to define.?
NatWest?s group millennium director, Jerry Whitmarsh was more cynical about what the tax relief would mean for the bank: ?Any concessions of this kind are welcome on our behalf and our business customers, but the benefits are not necessarily extensive. A great deal of our expenditure would be on new hardware. But on the basis that every little bit counts we are in favour.?
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