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VAT rise will hit IT budgets

The rise in VAT announced by Chancellor of the Exchequer George Osborne during the emergency budget will hit IT departments at a time when budgets are already tight.

Richard Brown, IT risk and assurance partner at Ernst & Young, said, "Many CIOs have had to operate with reducing or flat budgets during the downturn. During that period the need to invest in IT has not gone away and in many instances has become more mission critical.

"There is now a growing backlog of spend across many parts of the IT estate, such as hardware (server/laptop) refresh, implementing and licensing new and existing technologies, hiring contractors for skills gaps and new technical skills and purchasing third party service provision, which will need to be incurred. The VAT rise has just made that a little more expensive."

Although Brown believes many IT departments will not be hurt by the increase he said, it would have an effect on IT departments in organisations involved in financial services, health, welfare, housing, charities and central government.

"As they are unable to recover the VAT incurred on expenditure, there is therefore an increase in the overall cost," Brown said.


 

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