Capital goods scheme ― transfers, disposals and VAT groups

Produced by Tolley
Capital goods scheme ― transfers, disposals and VAT groups

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

  • Capital goods scheme ― transfers, disposals and VAT groups
  • Transfer of a business as a going concern
  • Purchaser takes over the existing VAT registration number
  • Purchaser does not take the existing VAT registration number
  • Disposing of a capital item
  • Disposal test
  • Applying the disposal test
  • Part disposals
  • Calculating the VAT
  • VAT groups
  • More...

IP COMPLETION DAY: 11pm (GMT) on 31 December 2020 marked the end of the Brexit transition / implementation period entered into following the UK’s withdrawal from the EU. At this point in time, key transitional arrangements came to an end and significant changes began to take effect across the UK’s VAT and customs regime. This document contains guidance on subjects potentially impacted by these changes. Before continuing your research, see the Brexit — overview guidance note.

This guidance note provides an overview of the CGS implications of the following transactions:

  1. transfer of assets as part of the transfer of a business as a going concern (TOGC)

  2. disposal of a capital item

  3. VAT group implications

This note should be read in conjunction with the Introduction to the capital goods scheme and Capital goods scheme ― intervals and adjustments guidance notes.

See ‘How to apply the Capital Goods Scheme’ by Jackie Yarrow in Tax Journal, Issue 1053, 20 (15 November 2010).

Transfer of a business as a going concern

If a business transfers a capital item as part of the TOGC, it will need to give the purchaser details of the capital item. The purchaser will be required to continue to make any further adjustments due in respect of the capital item for the remaining intervals.

The following implications need to be considered by the parties involved in the TOGC.

Purchaser takes over the existing VAT registration number

If the purchaser decides to keep the existing VAT registration number, the following applies:

  1. the adjustment interval in which the business is transferred continues without a break

  2. the seller is not required to make any CGS adjustments for that interval

  3. the purchaser is responsible for completing the CGS adjustment calculation for the whole of that interval. The interval ends on the last day of the transferee’s longer period ending immediately after the transfer (or if no longer period then applies, on the last day of the transferee’s tax year following the day of transfer).

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