Commentary

V7.236 Calculation method for the capital goods scheme

Part V7 Tax planning
Part V7 Tax planning | Commentary

V7.236 Calculation method for the capital goods scheme

Part V7 Tax planning | Commentary

V7.236 Calculation method for the capital goods scheme

Having fully analysed the scope of the capital goods scheme, the next stage is to look at the calculations of the scheme, and how these are carried out in practice. This paragraph assumes that the asset in question only has taxable and exempt use – V7.236A below considers changes introduced on 1 January 2011 if an item has non-business use as well. Since this date, the five or ten interval adjustments under the scheme take into account any change in non-business use of the asset as well as the change in taxable and exempt use. This is an important change, and particularly relevant for aircraft and boats where non-business use is likely to be an important aspect.

There are three key principles to consider:

  1.  

    •     if an item of qualifying expenditure is wholly used by a business in making taxable supplies throughout the five or ten-year adjustment period relevant to the asset then there will be no adjustments to make. This is because the 100% taxable use would have produced a full input tax recovery on the initial expenditure – and as the asset continues to be used wholly for the taxable part of the business, this

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