VAT capital goods scheme

Key points

• The capital goods scheme seeks to ensure businesses recover a fair amount of VAT on expensive assets used over a long time.
• Adjustments may be required if the ‘use’ of a capital item varies over time.
• A sales adjustment may be necessary when a capital item is sold during its capital goods scheme adjustment period.

The capital goods scheme (CGS) crops up regularly in Association of Taxation Technicians paper 6 which relates to VAT. From a question-setting point of view it is an important and versatile topic to test. For example the CGS could feature as part of a wider long question about land and property or partial exemption. It could also be tested in the context of a question about a transfer of a going concern. Equally it might be the principal focus of a question in its own right.

This article aims to give ATT – and...