VAT Capital Goods Scheme Changes from 29 July 2026
The UK government has simplified the VAT Capital Goods Scheme (CGS) effective from 29 July 2026. These changes directly affect how SME owners and Ltd company directors claim VAT recovery on major asset purchases, particularly for property and equipment investments.
Key Changes:
- Computers Removed: Computer equipment and items of computer equipment are no longer covered by the CGS. This means your VAT claims on IT hardware and software purchases will be handled under standard input tax rules, not the longer adjustment periods previously required.
- Threshold Increased: The capital expenditure threshold for land, buildings and civil engineering works has increased from £250,000 to £600,000 (excluding VAT). This threshold determines whether the CGS applies to your construction and property investments.
The CGS previously allowed VAT recovery across multiple years when assets were used partly for taxable and partly for exempt supplies. With the higher threshold, fewer property and building projects will trigger these adjustment rules, simplifying your VAT compliance.
What This Means for Your Business:
If you are planning capital investments in property, buildings or office equipment, you should review your VAT recovery strategy before year-end. The removal of computers from CGS scope may improve VAT cash flow for technology-heavy businesses, while the higher property threshold could allow full VAT recovery earlier.
For guidance on how these changes affect your specific situation, speak with your tax planning adviser or accountant. The rules are technical and applying them correctly can materially affect your tax position.