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Which industry is showing strong growth? - Simon Brooker
"Magazine ads plunge 26% in first quarter" - "Recession takes toll on Microsoft results" – “Boston Globe Situation dire”
With such stories dominating the headlines, it is of little surprise that the current view of the Technology, Media and Telecoms (TMT) sector is somewhat pessimistic. However, within the midst of all this economic downturn, there are some sub-sectors showing strong growth. One such industry is the data hosting providers. With IP traffic and digital data creation set to quadruple over the next four years, coupled with current legislative requirements, businesses are increasingly turning to data centres to help them store, manage and protect their data. In the current climate, as companies seek to reduce their IT spend, data centres are thriving on this relatively easy option to reduce costs.
Recession or not, the growth of the data centre industry is more or less guaranteed for the next few years; demand currently outpaces supply in Europe at 6 to 1 and BroadGroup predicts data centre floor space is set to grow by a staggering 35% each year to 2012.
BDO already act for a number of clients in this sector - whilst some industries will continue to struggle through the current downturn, the data centre industry is just one of many areas where we at BDO can leverage our sector knowledge and expertise.
Where can BDO provide value:
One of the major areas where BDO has demonstrated value is by helping data centre’s to navigate the capital allowance maze. Data centres, by their nature, incur heavy capital expenditure and by maximising claims for capital allowances - which have changed significantly since 2008 – we can potentially save data centre businesses six-to-seven figure tax bills.
- Changes in rates for plant and machinery and first year allowances: First year allowances of 40% should be maximised in 2009. Short life asset elections should be made where possible to accelerate capital allowance claims.
- New "integral features" allowances: The new allowances have resulted in advantages and disadvantages. Whilst allowances have now been reduced from 25-10% for "integral features" such as air conditioning, others such as cold water systems now qualify where previously they attracted no allowances at all.
- Annual Investment Allowance (AIA): From 1 April 2008, companies are allocated an annual allowance of £50k giving 100% capital allowances. This should be used wisely in the business and first allocated to assets with lower allowances such as integral features.
- Enhanced Capital Allowances (ECAs): ECAs allow companies to claim 100% allowances on expenditure on "green" assets – for example, if a data centre invests in a new energy efficient air-conditioning system, it could potentially save thousands if it chooses one from the list of approved technologies.
For more information on our expertise and sector knowledge in this area, please email Simon Brooker or telephone 0118 9254488.