VAT—capital goods scheme
Produced in partnership with Martin Scammell

The following Tax practice note produced in partnership with Martin Scammell provides comprehensive and up to date legal information covering:

  • VAT—capital goods scheme
  • Why does this matter?
  • What is the CGS?
  • What expenditure is in the CGS?
  • How does the CGS apply to non-business expenditure?
  • Over what period can CGS adjustments arise?
  • Ongoing adjustments
  • Example
  • Disposal
  • Disposal as a supply
  • More...

VAT—capital goods scheme

FORTHCOMING CHANGE: HMRC published a call for evidence in 2019 on ‘simplifying’ the rules on VAT partial exemption and the CGS. This considered various changes including raising the CGS threshold for land and property, and changing the number of CGS intervals. On 23 March 2021, the government published a response document stating that it would make some changes to its internal processes in relation to partial exemption, but would continue to engage with stakeholders about other proposed changes, including to the CGS. No timings were given for any next steps.

This Practice Note looks at the principles of the VAT capital goods scheme (CGS).

Why does this matter?

The CGS can create a substantial liability for property owners, particularly on a disposal. This can usually be avoided, but only if it is recognised and appropriate action is taken. This does not always happen, and negligence claims are not unusual.

The CGS can also sometimes allow additional VAT to be claimed from HMRC, and for some businesses it imposes an ongoing compliance obligation.

In a transfer of a going concern (TOGC), a buyer will often be acquiring potential liabilities, and it is strongly recommended that they obtain warranties about the CGS position (see Practice Notes: Transfers of a going concern involving land and buildings and VAT TOGC clause—asset purchase agreement—buyer and seller wording).

What is the CGS?

In general,

Related documents:

Popular documents