EMPLOYEES hoping to take advantage of a tax break to buy a home computer received a cruel blow last week when the chancellor unexpectedly axed the tax exemption underpinning the scheme.

The Home Computing Initiative had allowed employees to buy a tax-free computer through their workplace and pay for it in monthly instalments from their gross salary. A computer worth £1,524 on the high street, for example, would have cost a basic-rate taxpayer £954, a saving of £570.

The Forum of Private Business criticised the chancellor’s decision to end the scheme, saying it had helped to promote IT skills among the employees of small businesses.

Nick Goulding, the forum’s chief executive, said: “Encouraging employees to use computers at home can not only be rewarding and useful for them, it can also make them better employees. This will not help people to become computer literate and will damage the move towards a highly-skilled economy that the chancellor says is his goal.”

On balance, however, owners of small businesses breathed a sigh of relief as Gordon Brown unveiled his budget, saying it was fairly “benign”.

The chancellor delivered little in the way of real good news, but after several years of budgets containing unpleasant shocks for the small-business community, this time it was a case of no news is good news.

Stephen Alambritis of the Federation of Small Businesses said: “The budget was very neutral and really a bit of a non-event for small businesses — which in many respects is a good thing. The chancellor basically froze a lot of things and that has given small businesses a year’s relief from constant chopping and changing in tax rates and tax credits.”

Russell Gardner, a business adviser at Ernst & Young, said that while there was “little in the way of positive announcements for growing businesses, at least there was less bad news hidden in the detail”.

One piece of encouraging news was Brown’s decision to extend the scope of the existing research-and-development tax relief to medium-sized companies by raising the headcount limit from 250 to 500 employees for companies that could claim 150% tax relief.

Alambritis said this was a good move, but it applied only to firms that were incorporated and so would do nothing to help the 3m self-employed people who could not take advantage of the tax relief.

Another boost was Brown’s decision to increase first-year allowances on plant and machinery from 40% to 50%. The Forum of Private Business said the measure should encourage businesses to invest, resulting in increased productivity.

However, Stephen Herring, tax partner at the accountant BDO Stoy Hayward, pointed out that the same allowances had been reduced in the last budget from 50% to 40%, saying: “It does beg the question why the chancellor has flip-flopped by changing the relief up and down on such a regular basis. Small businesses would benefit from continuity and reduction in red tape, rather than continually having to reassess the tax impact of their investment options.”

The chancellor also promised to review the system of administering income tax and National Insurance deductions to see if it could be simplified, a move that would be warmly welcomed by the small-business community.