Chancellor Gordon Brown has been accused of opening a potential £2.75bn tax loophole by making the loan of computers to employees a tax-free perk.
The charge was levelled by former Treasury minister Stephen Dorrell, who claimed the terms of the concession, worth up to £500 a year, were so wide as to include computer games and interactive TV.
Tory MPs lost a vote which they forced on the move – designed by Brown to improve computer literacy. Dorrell said every PC had a screen capable of being used as a TV, a compact disc player or telephone.
He warned: ‘Employers who are looking for an alternative to the company car as a tax-efficient way of remunerating their employees will find the government has opened a socking great gap which will enable them to find that alternative without giving the taxman his due.’
Dorrell said he did not believe £2.75bn would ‘go down the pan’ but said the company car perk, introduced 20 years ago to boost the UK motor industry, is now having to be clawed back.
‘The proposal is precisely the kind of tax-planning opportunity that makes tax lawyers and zealous entrepreneurs rich,’ he added.
But economic secretary Patricia Hewitt said: ‘The purchase of huge quantities of Nintendo equipment and other appalling children’s computer games for use by employees’ children is hardly likely to qualify for the same business expenditure tax relief as the purchase of equipment for general use.
‘Tax exemption, up to a reasonable limit, for private use of computers that are lent by employers to employees for use at home is an imaginative measure that will help to spread computer literacy.’
The number of computers on loan is expected to start at 50,000 this year, 150,000 next year and 300,000 thereafter, and the concession will be reviewed if it gets out of hand.
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