No-one could deny that the last 18 months have been a boom period for home computing (HCI) schemes. According to the HCI Alliance, an alliance of industry leaders working together with the UK government on home computing schemes, over 530 employers now offer a scheme compared with only 30 in January 2004. Its research also shows that less than 32% of HR directors were aware of HCI in January 2004, but by this March the proportion had increased to 83%. Spencer Cohen, managing director of Intelligent Shopping, says: “Two years ago, you had to sell the concept, but now around 80% of employers understand it and are primarily concerned with making sure they select the right provider. They now have over 70 to shop around between, compared with only five in January 2004, and they are very conscious of the choice they have. “They like to know that providers are competitive and offer a good range because they are aware that different specifications of computer and printer can be made available and that staff will want to pick and choose. Employees are very much pushing their employers to launch the schemes, after hearing about the concept from friends, and there is also a trend for providers to get involved with the SME market. Until recently, they simply weren’t interested in organisations with less than 1,000 staff.” Other notable trends during the past nine months include a marked increase in public sector business and a rise in the popularity of media centres – computers that bring together all aspects of digital home entertainment but still qualify under the remit of HCI schemes. Laptops have also caught up in popularity with desk-top machines. The main issue on everyone’s lips is undoubtedly the length of time being taken by the Office of Fair Trading (OFT) in granting licences exempting employers from the employee’s right to terminate their agreement after 18 months under the Consumer Credit Act. Because HCI schemes are required to last three years they are not feasible without such an exemption. The OFT is currently taking 10 weeks to deal with applications and this could increase further because Christmas is a boom period for HCI providers. But pressure from organisations such as the HCI Alliance is due to secure a review of the approval process. Another issue due to come under governmental review is the fact that salary sacrifice arrangements cannot be used if it takes an employee below the minimum wage and, because poorly paid workers tend not to be very IT literate, this means that some of those who need the schemes the most are excluded. Consideration is also being given to the fact that broadband is not currently allowed as a tax-free benefit under HCI. Chris Wells, chief executive of BT Home Computing, says: “Broadband is undoubtedly one of the most important developments relevant to personal computers in the last couple of years and it therefore seems somewhat incongruous that it’s not permissible as a tax-free benefit. My understanding is that the matter is being considered by the Treasury and the Department of Trade & Industry (DTI) and I feel it’s only a matter of time before it is allowed, but I can’t see it happening this year.” Alastair Kendrick, director at Ernst & Young, also notes concerns that have been very much in evidence around legal documentation for employees. “The major problem is that agreements often say that employees can return their computer at the end of a three-year term or buy it by making a particular payment. Some companies have tried to make very small sums payable but HM Revenue & Customs is likely to say payment must be at market value. “Employers don’t want to use a market value basis because they want to give certainty to employees but the Revenue is saying that companies that don’t do so must pay the difference between the market value and the payment made. One or two Revenue inspectors have also actually asked for evidence to support the fact that the equipment is deteriorating along the lines anticipated during the term.” On the product side, providers are increasingly seeking to develop long-term relationships with employees by providing discounts on a range of accessories such as ink, paper and keyboards. A couple of players have set examples that seem destined to be followed by others in due course. Since April 2004, for example, Grass Roots Group has moved away from home delivery to its “select and collect from PC World” model. While in April this year, RedPC put in place a service level agreement which guarantees 95% first time delivery and installation within an hour and makes compensation payments it if doesn’t do this. Most off-the-record gossip centres around the fact that some providers are asking for up-front management charges and consultancy fees in a field in which there has traditionally been no charge made to employers. But no-one is prepared to name the companies concerned. Anonymous accusations are also made about the supposed presence of illegal schemes and the fact that some providers are offering out-of-date specifications, meaning that computers may cease to be of use well before the end of the three-year term despite the fact that employees have to carry on paying for them. The FactsWhat are home computing schemes?Home computing schemes enable employers to loan computer equipment to employees for use at home by them and their families at a low cost without incurring a P11D tax liability. What are the origins of home computing schemes?Following successful similar arrangements in Sweden, these were introduced in the 1999 Finance Act to facilitate wider ownership of PCs at home and to get the UK online. But, although the tax advantages have been available since 1999, the government didn’t make the matter a policy issue until January 2004, when it published guidelines under Department of Trade and Industry (DTI) branding, together with information packs which included formal clarification of the tax position. Where can employers get more information on home computing schemes? The DTI website: www.dti.gov.uk/hci The HCI Alliance website: www.ukhomecomputing.co.uk Nitty GrittyWhat are the costs involved?Most schemes are funded by providers from the margins they realise on computer sales and involve no cost to employers. Employees get a competitively-priced PC with the cost usually spread over three years. They can save 40% to 50% off a computer’s normal purchase price. What are the legal implications?Schemes must be granted licences by the OFT and are regulated by the Consumer Credit Act, which was updated this May to require the provision of additional information to employees who hire equipment. Salary sacrifice arrangements must be structured to ensure that it doesn’t take employees below the minimum wage or impact on tax credits. What are the tax issues?If correctly structured, both employers and employees will save on national insurance contributions under an HCI scheme. Employees, who do not incur a P11D liability, also save on income tax by paying for the cost of the equipment out of gross salary and can avoid paying VAT if their employer can claim it back. To do so, the employer must be VAT registered and intend for the computers to have at least some business use. In PracticeWhat is the annual spend on home computing schemes? No official statistics are available, but the HCI Alliance estimates that the market spend for 2004 was approximately £200 million and expects this to rise to £500 million this year. Which providers have the biggest market share?No two sources volunteer the same short-list of market leaders, but leading players include Fujitsu Siemens, Dell Corporation, BT Home Computing, Grass Roots Group/PC World, OneCall, Futuremedia, Hewlett-Packard and RedPC. Which providers increased their share the most over the past year? The entire market has been growing so rapidly during the past year that no one provider can claim to be the fastest growing.