Tax breaks to ease 2000 bug war

This week's budget is expected to deliver a tax break to companies, allowing them to write off the costs of fighting their year 2000 battle in perpetration for EMU conversion costs and re-programming for the date change.

According to various press reports, spending on remedial software and on outside project teams to ensure existing systems are millennium-compliant will come under revenue rather than capital expenditure.

The Chancellor of the Exchequer, Gordon Brown, delivered his budget on 17 March.

The changes mean any spending will be fully recoverable against corporation or income tax in the year it occurred. Previously, it was treated as long-term capital cost and was written off against tax over a number of years.

Traditional IT capital expenditure will continue to be considered a capital cost, so companies cannot buy new millennium-compliant computers to replace their legacy systems and expect to benefit from the break.

The Treasury's concession to the strain incurred by companies dealing with the date change comes after determined campaigning by former Tory Treasury minister, Lord Cope, who is a director of Prove It 2000, a provider of millennium-bug systems.

He said: 'Something had to be done to encourage companies to act on the millennium bug - and money talks. The tax break is a carrot to act now although it encourages companies to take remedial action, rather than allowing them to bring in capital.'

When asked if the government's changes were too little and too late, Cope said: 'With hindsight, it is clear more should have been done by the government to make the industry face up to its responsibilities.'