VAT-registered businesses that incur VAT on capital expenditure should be aware of new rules that came into force on 29 July 2026.
These Capital Goods Scheme (CGS) changes aim to simplify the administration of VAT and reduce the weight on small businesses that have had to make CGS calculations.
Assets currently covered by the scheme are:
> land, buildings and civil engineering works,
> a computer or an item of computer equipment.
What are the changes?
From 29 July 2026,
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- Computers and computer equipment come out of the scheme and are now treated as normal for VAT.
- The threshold for land, buildings and civil engineering works rises from £250,000 to £600,000 (excluding VAT).
Therefore, projects under £600,000 (excluding VAT) no-longer need to be tracked.
Ships and aircraft are untouched. Their £50,000 threshold and five-year adjustment period carry on exactly as before.
What needs checking?
If a business has land, property or capital equipment purchases in progress or planned, the date the expenditure began is important, rather than when the project is due to be completed.
Equally, it is only new computer purchases (expenditure first incurred on or after 29 July), that fall outside of the scheme.
Background
The original thresholds have been in place since 1990, and so the new value figures reflect the rise in property prices during that time.
The decrease in the cost of computer equipment over the last 30 years has virtually made that category redundant.
Further information
We’re here to help with specific queries. Our VAT experts would be happy to assess your position, and then follow up with a way forward.