Commentary

V7.237 Capital goods scheme—capital assets purchased before VAT registration

Part V7 Tax planning
Part V7 Tax planning | Commentary

V7.237 Capital goods scheme—capital assets purchased before VAT registration

Part V7 Tax planning | Commentary

V7.237 Capital goods scheme—capital assets purchased before VAT registration

An unregistered business is able to claim input tax on goods (including stock) bought within the four-year period before its date of VAT registration, as long as the item is still held on the first day of VAT registration and is used for the purpose of the business (ie for taxable purposes). The claim is made on the first VAT return submitted by the business. In the case of services obtained before the date of VAT registration (including building services), the four-year period is reduced to six months.

In the case of a business making an option to tax election on a property, and then registering for VAT once the option has been made, there had, until 1 January 2011, been no opportunity to reclaim input tax on the property outside the four-year period (or six months in the case of building services). However, a facility existed to allow some recovery of input tax in such cases, linked to a capital goods scheme type calculation. This facility was withdrawn for

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