Cloudy view of emergency budget

Kate Craig-Wood makes five pertinent points for IT providers about yesterday's Emergency Budget

Craig-Wood: Welcomes VAT increase

*Firstly, I greatly welcome the reduction in corporation taxes in an effort to boost the attractiveness of business in the UK. Also, speaking personally, less tax will enable me to invest more in my company, growing the business faster and creating more jobs.

*I think I heard that they are extending the time on capital assets. If that is the case, it will be a blow. Despite the fact that servers only last us about 3-4 years, and we amortise them over that period, for tax purposes we are already forced to depreciate them over five years.

If they are extending, that it is very bad news for infrastructure-heavy IT companies (such as cloud providers like us). Government does not appreciate that the ‘plant machinery’ of the IT sector (for example, servers) have a limited shelf-life. I fear that this will make the UK even more unattractive as a place to site datacentres.

*There was talk of extending the Enterprise Finance Guarantee (EFG) scheme. However, the EFG is broken! It was supposed to help banks lend to entrepreneurs without requiring large personal guarantees, but the banks are not honouring that, and still will not share any of the risk. The EFG needs fixing, before it gets extended.

*I welcome the £2m entrepreneur relief being extended to £5m gains over a lifetime. Although I'm not looking for an exit anytime soon, it is important to encourage new entrepreneurs, and to attract the right people that allowance needs to be in the £5m range.

*I also welcome the VAT increase to 20 per cent. Taxation at the point of spending is one of the fairest taxing methods since people can choose. Also, as we saw with the VAT reduction, a change of 2.5 per cent in the headline price of consumer goods has little impact on consumer spending.

Also, it will not affect most businesses significantly since we can pass it straight through.

Kate Craig-Wood is managing director and co-founder of Memset