UK Small Firms Gain Flat Rate VAT Extension But Lose IT Tax Relief

by Robert Lee, Tax-News.com, London

26 March 2003

UK Small Business Minister Nigel Griffiths told SMEs that they can enjoy an extended period of flat rate VAT, with the scheme due to be continued beyond 30 April this year. This is expected to benefit around 200,000 small firms in the UK by up to £1,000 per year.

The Minister also revealed that the small business sector can look forward to continued support from the government. However, what Mr Griffiths didn't mention at last week's Small Business Annual Conference in Brighton, was the phasing out of the 100% tax relief on the purchase of IT equipment which expires at the end of this month.

According to accounting firm Hacker and Young, there has been nothing from the Chancellor's office that suggests the tax relief scheme will continue.

This is likely to be a great loss to small firms, with IT spending an often expensive necessity in today's business environment. The perk was introduced in April 2000 as an incentive for firms to bring their systems up to date by buying software, peripherals and WAP enabled mobile phones.

Speaking to the Out-Law news service this week, Roy Maugham, a tax partner at Hacker and Young advised small firms to take advantage of the break while they still can. "Many SMEs have taken advantage of this scheme, but there are many more that are not even aware of it. IT spend is a necessity so it makes sense for any small business looking to buy IT in the next two years to invest now while they can still escape tax," he advised.

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