IT industry raps government

Dissatisfaction with tax policies at root of grievances

Government support for the IT sector is seen as poor

Senior UK IT leaders have hit out at government tax policies, claiming they do not support IT sector growth.

IT is the second largest sector in the UK economy, responsible for 6.4 per cent of gross domestic product and trailing only financial services at 7.5 per cent.

But an independent survey found 54 per cent of senior IT professionals felt the government’s support for the IT sector was poor, and specifically criticised policy, not global economic conditions, for the current position.

Eighty per cent felt the Conservative party has a better understanding of the IT sector.

Of particular concern to respondents was research and development (R&D) tax credit policy, seen as good for small firms, but not larger businesses.

“The real value of the tax credit for big businesses is not enough to break through the noise level for chief financial officers of large, international companies,” said Tom Wills-Sandford, deputy director general at IT trade body Intellect.

“R&D is fundamental to the success of the UK’s knowledge economy and the UK has lagged behind its international competitors.”

In October 2007 “taper relief”, which gave tax relief according to type and level of investment, was replaced with a flat 18 per cent rate capital gains tax ­ in effect increasing the tax on investment in smaller businesses.

The Conservatives say they would restructure capital gains tax to favour innovative new businesses. Shadow chancellor George Osborne recently visited Silicon Valley, and the opposition is claiming that it understands the importance to the economy of developing a home-grown IT industry, according to shadow financial secretary Mark Hoban.

“Current government policy is a kick in the teeth for those investing in IT companies,” he said.

The Department of Business, Enterprise and Regulatory Reform (BERR) said more than £2.3bn of support has been given to business R&D through tax credits.
“The government is not putting enough energy into supporting IT,” said Chris Williams, partner at corporate finance specialist Cobalt, which surveyed 107 members of the Worship Company of Information Technologists last month.