VAT Capital Goods Scheme (CGS) threshold up to £600,000
The long-awaited increase in the Capital Goods Scheme threshold from £250,000 to £600,000 finally came into effect on 29 July, more than a year after it was announced and having been at £250,000 since the Scheme was introduced in 1990.
By way of recap, the CGS extends the period over which the use of a capital asset is assessed for input tax recovery from one year to ten years (for property) and from one year to five years (for computers and computer equipment) so that any change between taxable and exempt use in that period affects the VAT recovered when the asset was acquired.
Prior to 29 July 2026 the CGS applied to capital expenditure on land, buildings, works to land and buildings and civil engineering works of £250,000 plus VAT or more and to computers and computer equipment of £50,000 plus VAT or more.
From 29 July 2026 the threshold for land and property has increased to £600,000 plus VAT and computers and computer equipment have been removed from the Scheme.
Any assets acquired or work commenced prior to 29 July 2026 will remain under the £250,0000 threshold for the remainder of the Scheme so it is only new acquisitions or work commenced after 29 July 2026 which will be subject to the new threshold.
This is a significant change for businesses who are partly exempt and will particularly impact charities owning property assets.
It will also reduce the number of businesses affected by the anti-avoidance rules around opting to tax property which is let to a partly exempt or exempt connected party.
If you would like to discuss this change and how it affects you, please don’t hesitate to get in touch.
