VAT Capital Goods Scheme

Posted on 6th September 2022 by Streets Value Added Tax


Image to represent VAT Capital Goods Scheme

The VAT Capital Goods Scheme (CGS) is a means of adjusting the initial VAT recovery in respect of certain assets over either 5 or 10 years. The scheme seeks to agree a fair and reasonable attribution of VAT to taxable supplies and non-taxable supplies relating to the use of an asset over its lifetime.

The adjustment period for land and buildings is 10 years and for other CGS assets, 5 years. This adjustment period also considers any non-business use of the asset. The CGS is intended primarily for partly exempt businesses. However, businesses can change direction over the adjustment period and be subject to making CGS adjustments some years after an asset was purchased.

The CGS currently applies to:

  • Land and building (including extensions, alterations and refurbishments) with a cost (net of VAT) of £250k or more.
  • Computers, or computer equipment, with a cost (net of VAT) or £50k or more.
  • Ships and boats with a cost (net of VAT) of £50k or more.
  • Aircraft with a cost (net of VAT) of £50k or more.

The scheme does not apply if:

  • the assets are acquired solely for resale;
  • you spend money on assets which are solely for resale; and
  • assets are acquired, or you spend money on assets, which are wholly used for non-business purposes.

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Information

The content used by Streets has been obtained from or is based on sources that we believe to be accurate and reliable. Although reasonable care has been taken in gathering the necessary information, we cannot guarantee the accuracy or completeness of any information we publish and we accept no liability for any errors or omissions in material. You should always seek specific advice prior to making any investment, legal or tax decisions.


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