Two hundred thousand small firms will have their compliance
costs cut by up to £1,000 a year with the extension of the flat
rate VAT scheme from 1st April 2003. However, this date also marks
the end of the potentially more valuable 100% tax relief scheme for
purchasing new IT equipment.
Addressing the Federation of Small Businesses Annual Conference in Brighton on Friday, Small Business Minister Nigel Griffiths told entrepreneurs about the extension of the flat rate VAT scheme, adding that they could expect more help from the Government on dealing with the regulatory burden.
Unfortunately for small and medium sized businesses, there was no mention from Griffiths of extending the scheme that offers 100% tax relief on the purchase of new IT equipment. The scheme is set to expire at the end of March. Accountancy firm Hacker Young notes that Chancellor Gordon Bown also has offered no indication that the scheme will continue following his Budget on 9th April .
Roy Maugham, a tax partner with the London-based firm said:
"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."
The definition of a small business under the scheme is any business employing less than 50 people, with turnover less than £2.8 million and assets totalling less than £1.4 million.
The tax relief scheme was introduced in April 2000 to encourage these businesses to modernise by purchasing new computers and peripherals, software and internet-enabled mobile phones.
