Clause 61 — Computer equipment

Part of Orders of the Day — Finance (No. 2) Bill – in the House of Commons at 5:54 pm on 2nd May 2006.

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Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury) 5:54 pm, 2nd May 2006

Prior to 6 April 2006, employers who made computer equipment available for private use by their employees could do so tax-free, providing that the annual amount of the benefit in kind was £500 or less—that is the equivalent of £2,500 of computer equipment, inclusive of VAT. The clause removes that tax exemption. With effect from 6 April 2006, a tax charge will arise on the benefit in kind that arises in those circumstances. However, the clause does not change the position when an employer provides the use of computer equipment solely for work purposes and private use by the employee is not significant.

The question that everybody has been asking is: why are the Government doing this? It is perfectly true that many employees have benefited from the tax exemption, but the home computer initiative has been used extensively by groups that we would not generally expect to have difficulty accessing information technology. For example, 25 per cent. of those participating in the home computer initiative are higher rate taxpayers—more than twice the proportion among taxpayers as a whole. Furthermore, nearly one third of HCI participants are from white-collar industries—often defined as industries with a greater proportion of higher-than-average earners.