Capital goods scheme ― transfers, disposals and VAT groups

By Tolley

The following Value Added Tax guidance note 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
  • Disposing of a capital item
  • Part disposals
  • VAT groups
  • Residential property ― long leasehold interest is sold separately from the freehold interest
  • The grant or assignment of a tenancy or lease
  • Lost, stolen, destroyed, etc

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

  • transfer of assets as part of the transfer of a business as a going concern (TOGC)
  • disposal of a capitalitem
  • VAT group implications

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

SI 1995/2518, regs 112-116; 2006/112/EC, Article 187 ; HMRC Notice 706/2 ; Centralan Property Ltd v Customs and Excise Commissioners C-63/04 [2003] STC 290 (subscription sensitive)

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

Transfer of a business as a going concern

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

VTOGC5250; VAT and Property, para 3.2

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:

  • the adjustment interval in which the business is transferred continues without a break
  • the seller is not required to make any CGS adjustments for that interval
  • 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

More on Capital goods scheme: