The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:
This guidance note provides details regarding the periods of adjustments and adjustment calculations that need to be undertaken by businesses that have assets that come within the scope of the capital goods scheme (CGS). This note should be read in conjunction with the Introduction to the capital goods scheme and Capital goods scheme ― transfers, disposals and VAT groups guidance notes.
As outlined in the Introduction to the capital goods scheme guidance note, adjustments will only be necessary under CGS where there is a change in the use of the capital item during the adjustment period. Therefore, there will be no requirement to make CGS adjustments where:
However, where the use of the item changes over the adjustment period, CGS adjustments will be required.
It should be noted that there was a significant change to the CGS from 1 January 2011 whereby changes in non-business use of the capital item are adjusted via the CGS for items acquired after that date. There was no mechanism for adjusting for changes in non-business use via CGS prior to this date.
Another point of note is that since 1 January 2011, the Lennartz mechanism (full input tax recovery at the time when an asset is purchased, with output tax
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