High-tech logs on for tax boost

Small high-tech companies could benefit from a package of tax breaks to remove existing barriers to growth and capital investment in the Budget in March. A special committee is due to make its final report to Treasury ministers, although tax experts warned the government is unlikely to favour one industry sector.

The committee’s proposals will concentrate on small companies ‘at the leading edge of technology’. The group is understood to have persuaded the Inland Revenue that restricting tax breaks to the smallest high-tech companies in key fields like IT, software, electronics and biotechnology would limit the cost to manageable proportions.

Proposals include allowing companies to sell tax losses to shareholders releasing funds for investment plus tax cuts on share options where they might attract managers to join small high-tech companies. This would put small companies heavily involved in research and development on the same footing as research arms of large companies whose losses can be offset elsewhere in their groups.

But John Whiting, Price Waterhouse’s head of direct tax, warned: ‘It is an interesting idea, but the government is unlikely to introduce tax breaks favouring one industry sector.’

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