The Capital Goods Scheme is a VAT mechanism that affects businesses buying high-value assets such as property or expensive equipment. It adjusts the amount of VAT you can recover over several years to reflect how the asset is actually used.
What the Scheme Covers
The Capital Goods Scheme applies to certain capital items above set value thresholds, most commonly land and buildings, and some computer and aircraft expenditure. These assets are watched over an adjustment period rather than having their VAT settled in one go.
How Adjustments Work
Under the scheme, the initial VAT recovery is reviewed each year across the adjustment period. If the proportion of taxable use changes, you may have to repay some VAT or be entitled to recover more, keeping recovery in line with actual use.
Why It Matters
The Capital Goods Scheme is especially relevant to partly exempt businesses and property owners, where use can shift over time. Overlooking it can lead to incorrect VAT recovery and later corrections.
How TaxDigit Can Help
Our Guildford-based team helps businesses apply the Capital Goods Scheme correctly. Contact us to get your VAT recovery on major assets right.
Capital Goods Scheme: UK-Wide VAT Support
The Capital Goods Scheme affects businesses buying high-value assets right across the United Kingdom, not just near our Guildford head office. TaxDigit helps businesses UK-wide adjust VAT recovery on property and expensive equipment correctly over the adjustment period.
Our chartered certified accountants track each capital item, calculate the annual adjustments and keep your VAT recovery accurate for the full scheme period. We support clients UK-wide, both remotely and from our Guildford office.
The Capital Goods Scheme is easy to overlook because the adjustments fall in later years, long after the asset is bought. A change in how a building is used, a move between taxable and exempt activities, or a sale partway through the period can all trigger a clawback or an extra recovery. We diarise each item so these adjustments are made on time rather than missed and queried later by HMRC.
How we help with the Capital Goods Scheme
- Identifying assets that fall within the Capital Goods Scheme
- Setting the correct five or ten year adjustment period
- Calculating annual VAT adjustments as usage changes
- Handling adjustments on the sale of a capital item
- Keeping records to support every adjustment
HMRC explains the scheme here: HMRC guidance on the VAT Capital Goods Scheme.
Frequently Asked Questions
What is the Capital Goods Scheme?
It is a VAT mechanism that spreads and adjusts the VAT recovery on certain high-value assets, such as property and expensive computer equipment, over a five or ten year period.
Which assets are covered?
Typically land and buildings over a set value and certain high-value equipment, with the adjustment period depending on the type of asset.
Can TaxDigit help if I am not based in Guildford?
Yes. We advise on the Capital Goods Scheme for clients UK-wide, remotely and from our Guildford office.