Value Added Tax

Capital goods scheme (CGS) ― what is covered?

Produced by Tolley
  • 12 Jan 2022 11:31

The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Capital goods scheme (CGS) ― what is covered?
  • What kinds of asset are covered by the capital goods scheme?
  • General approach to valuing capital items for the CGS
  • Land and buildings that are capital items
  • What kinds of expenditure on land and buildings, etc is included?
  • Valuation of acquired land and buildings for CGS purposes
  • Valuation of constructed buildings or civil engineering works
  • Valuation of alterations, extensions and annexes
  • Valuation of refurbishment and fitting out
  • Phased refurbishments
  • More...

Capital goods scheme (CGS) ― what is covered?

This guidance note looks at the kinds of asset that are covered by the capital goods scheme (CGS).

For an overview of the CGS more broadly, see the Capital goods scheme (CGS) ― overview guidance note.

In-depth commentary on the CGS can be found in De Voil Indirect Tax Service V3.470.

What kinds of asset are covered by the capital goods scheme?

The CGS does not apply to all kinds of asset. In fact, it covers a relatively limited range of assets. These assets are often referred to as ‘capital items’. Capital items fall into three broad categories:

  1. land and buildings valued at £250,000 or more (excluding VAT)

  2. computers valued at £50,000 or more (excluding VAT)

  3. aircraft, ships, boats, and other vessels valued at £50,000 or more (excluding VAT)

SI 1995/2518, reg 113; Notice 706/2, para 3.1

The remainder of this guidance note explores these categories in more detail and discusses how to determine the value of an asset for CGS purposes.

General approach to valuing capital items for the CGS

The valuation of an asset is critical to deciding whether it is a capital item for CGS purposes. Only items exceeding the relevant value thresholds (£250,000 or £50,000 depending on the category of asset) will be covered by the CGS and therefore potentially subject to CGS adjustments (see the Capital goods scheme (CGS) ― intervals and adjustments guidance note).

As a general rule, capital expenditure is normally the expenditure which has been capitalised for accounting purposes. HMRC suggests it

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