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Buying IT before the end of 2015 could help businesses offset tax

Upgrading servers or refreshing desktops before the end of the year could make sense for businesses

Businesses have until December 2015 to make the most of the tax relief given for major investments, BNP Paribas has warned.

The Annual Investment Allowance (AIA) is set to be cut from £500,000 to £200,000 from the end the year.

Businesses claimed £79.7bn in capital allowances for machinery and IT equipment in 2013/14 – the highest total since the 2008 recession and up by 19% on the £66.9bn of capital allowances claimed the previous year.

However, BNP Paribas Leasing Solutions warned that the rate of investment in new equipment and machinery could start to slow as a key capital allowance is cut back from the end of 2015.

While tax relief is available on capital investment over the AIA limit, the relief is spread across the whole life of the asset rather than being available immediately, making it less valuable to businesses seeking to reduce their short-term tax liability.

With Microsoft Windows Server 2003 no longer supported, support for SQL Server 2008 ending at the end of October 2015, and the launch of Windows 10, businesses can potentially make big savings in terms of tax relief by purchasing PCs and servers before the year is out.

However, as Computer Weekly has previously reported, these investments need to be weighed up against the effects of currency, given that the strong US dollar has effectively made PCs and servers 20% more expensive.

BNP Paribas Leasing Solutions CEO Tristan Watkins said: "The latest figures on the use of capital allowances show how crucial the Annual Investment Allowance, in particular, has been in helping businesses to prioritise investment at a time when the economy has been climbing out of the recession.

"While British businesses have done extremely well on job creation, they have lagged slightly on productivity, which means they could risk falling behind overseas rivals," he added.

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