How will the VAT rise hit business and technology?

The media has been awash with the pros and cons of the rise of VAT to 20 per cent. We take a look at how it could affect your business and the technology sector overall.

"However, [if] turnover has to be less than 70,000 it is unlikely that you'll be looking at spending more than 10 per cent of that on IT equipment maximum 7,000 leading to around 150 extra costs for the year no big deal."

Enterprises will not feel the burn

For a large enterprise even one that is being conservative with its budget a 2.5 per cent rise would seem like peanuts in the grand sums paid out.

However, as Longbottom pointed out, this money is something the companies can just get reimbursed.

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"In essence, companies will not be that affected," he said. "For any organisation that is VAT registered, they can claim back all VAT on purchases, so there will be no net increase to pay on capital expense such as IT equipment."

Technology caught in the middle?

So a lot companies from various sectors will not be as badly affected as some of the shocking headlines from the past few days may have made out.

However, for technology companies selling on their wares, there will be a fine line between a seamless tax transition and a detrimental one.

Longbottom said the biggest effect will be taken on by the consumer. This, in turn, could damage technology sellers.

He said: "For a consumer, they are looking at being faced with an extra VAT level on a great deal of what they are buying and big ticket items will be the ones that get hit most. So, a 10 CD [or] DVD will probably still get bought. A 200 netbook will be a fiver extra [and] a 1,000 gaming PC will be [around] 25 extra."

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