Commentary

V7.234 Situations when the capital goods scheme is relevant

Part V7 Tax planning
Part V7 Tax planning | Commentary

V7.234 Situations when the capital goods scheme is relevant

Part V7 Tax planning | Commentary

V7.234 Situations when the capital goods scheme is relevant

If a business only makes exempt supplies, then it will not be VAT registered because it is not making taxable supplies. In such cases, any VAT charged on the purchase of capital equipment becomes part of the cost of the equipment, ie the gross amount of the invoice is capitalised to the fixed asset account. A business only making exempt supplies has no opportunity to reclaim any input tax on its purchases.

If a business wholly makes taxable supplies, and no exempt or non-business supplies, then input tax can be fully reclaimed

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