If you acquire, create or construct capital items for use in a business and you incur VAT on those items, you may need to use the VAT Capital Goods Scheme (CGS) on your VAT returns.
The CGS is a mechanism that adjusts the amount of VAT a business can recover on certain high-value capital assets over a number of years to reflect changes in how the asset is used over time. Previously, the CGS applied to certain high-value capital expenditure, including land; buildings; and civil engineering works costing £250,000 or more (excluding VAT). It also covered computers and computer equipment costing £50,000 or more, as well as aircraft; ships; boats and other vessels costing £50,000 or more.
From 29 July 2026 computers and computer equipment have been removed from the CGS. The threshold for land; buildings; and civil engineering works has increased to £600,000 excluding VAT. The existing £50,000 threshold continues to apply to qualifying aircraft; ships; boats; and other vessels.
The changes do not remove items that were already within the CGS. If a capital item qualified under the previous rules and thresholds, it will remain within the scheme until the end of its adjustment period. Businesses must therefore continue to make any required CGS adjustments, even where the first adjustment period begins on or after 29 July 2026.
The new £600,000 threshold applies to land acquired on or after 29 July 26. For buildings and civil engineering works, it applies where they are acquired; constructed; refurbished; fitted out; altered; or extended on or after that date.
If your business has made, or is planning to make, significant capital expenditure, please contact us if you are unsure whether the CGS applies or whether any adjustments are required.
If you acquire, create or construct capital items for use in a business and you incur VAT on those items, you may need to use the VAT Capital Goods Scheme (CGS) on your VAT returns.
The CGS is a mechanism that adjusts the amount of VAT a business can recover on certain high-value capital assets over a number of years to reflect changes in how the asset is used over time. Previously, the CGS applied to certain high-value capital expenditure, including land; buildings; and civil engineering works costing £250,000 or more (excluding VAT). It also covered computers and computer equipment costing £50,000 or more, as well as aircraft; ships; boats and other vessels costing £50,000 or more.
From 29 July 2026 computers and computer equipment have been removed from the CGS. The threshold for land; buildings; and civil engineering works has increased to £600,000 excluding VAT. The existing £50,000 threshold continues to apply to qualifying aircraft; ships; boats; and other vessels.
The changes do not remove items that were already within the CGS. If a capital item qualified under the previous rules and thresholds, it will remain within the scheme until the end of its adjustment period. Businesses must therefore continue to make any required CGS adjustments, even where the first adjustment period begins on or after 29 July 2026.
The new £600,000 threshold applies to land acquired on or after 29 July 26. For buildings and civil engineering works, it applies where they are acquired; constructed; refurbished; fitted out; altered; or extended on or after that date.
If your business has made, or is planning to make, significant capital expenditure, please contact us if you are unsure whether the CGS applies or whether any adjustments are required.
