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.

Longbottom added: "When combined with rising travel costs and other inflation-busting rises across many areas, [such as] the likelihood of no pay rise this year and mortgage rates likely to rise sharply, it will make people look harder at outgoing expenses."

As a result business to consumer (B2C) companies may suffer.

"For B2C technology companies, it will be tough not just due to VAT, but due to a combination of things where VAT is one of the more visible," he added.

"We will see many such companies go to the wall unless they can protect themselves against the consumer by having a solid base of B2B business."

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The other concern for those looking to buy new technologies, however, is that the VAT rise will just be an excuse for companies to sneak extra pounds onto their prices.

Rene Millman, senior analyst at Gartner, said: "Some tech companies have, unfortunately, decided that they can use the VAT change as a means to increase the price tags of their goods."

"As the economy is still faltering, this will do nothing positive to customers that are already feeling the squeeze from wage freezes and cuts."

A permanent fixture?

Osborne has claimed the 2.5 per cent rise will remain "permanent" but there are questions as to whether political pressure will force a u-turn or if the rise itself will have the desired impact on the UK economy.

However, looking at the history of VAT, Millman thinks we are in it for the long haul.

"Most rises in VAT over the last fifty years have been permanent (if not all of them)," he said. "That recent decrease was a reaction to a very unusual turn in the economy."

"It's 20 per cent for the foreseeable future."

How will the VAT rise affect you and your company?

We are keen to hear from our readers about how you think the VAT rise will affect both you and your organisation.

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Whether you are from a small business or a large enterprise, let us know your thoughts by emailing us at comments@itpro.co.uk.

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