Aug 5

2026

Capital Goods Scheme changes took effect on 29 July: what property-owning businesses need to check

From 29 July 2026, the UK VAT Capital Goods Scheme threshold for land, buildings and civil engineering works increased from £250,000 to £600,000, excluding VAT. Computers and items of computer equipment were also removed from the scheme.

The transitional rule needs careful attention. The new treatment applies only where no relevant capital expenditure was incurred on the item before 29 July 2026. A project spanning the effective date may therefore remain subject to the previous rules, even if most of its expenditure arises later. Assets already within the scheme must continue to be reviewed until their original adjustment periods end.

What changed

The Capital Goods Scheme adjusts the VAT recovered on certain high-value assets when their taxable, exempt, business or non-business use changes. Land, buildings and civil engineering works are generally reviewed over 10 intervals, while ships and aircraft are reviewed over five.

HMRC estimates continuing administrative savings of approximately £0.6 million a year, while the Exchequer impact is expected to be negligible. The detail appears in the government’s Capital Goods Scheme simplification policy paper, while ICAEW’s summary of the change provides a practical overview.

The timing trap

Signing a contract before 29 July does not by itself determine which threshold applies. The key question is whether relevant capital expenditure was incurred on the item before that date.

For example, a taxable £480,000 property acquisition or refurbishment for which no relevant expenditure was incurred before 29 July will normally fall below the new threshold. However, where relevant expenditure on the same capital item was incurred earlier, the previous £250,000 threshold may continue to apply. Businesses should not delete existing records simply because the current threshold is higher.

The same record-keeping discipline supports claims for capital allowances for business owners and planning around the 2026 capital allowance changes.

Ireland has not adopted the UK change

The Republic of Ireland operates a separate property-based Capital Goods Scheme. The new UK £600,000 threshold does not apply there. Revenue’s guidance on the Capital Goods Scheme explains that a new capital good generally has a 20-interval VAT life, while qualifying refurbishment work normally has a 10-interval adjustment period.

Northern Ireland follows the UK Capital Goods Scheme rules for land and property. Businesses holding assets in Northern Ireland and the Republic of Ireland may therefore need separate records and calculations. This is another area where VAT compliance across the UK and Ireland border, setting up a company in both the UK and Ireland and advice from a cross border tax and accounting team need to be coordinated.

What to check now

Review every live CGS item, its first-use date, adjustment intervals and previous calculations. Identify projects with expenditure on both sides of 29 July and confirm which threshold applies. Remove only computer expenditure that falls wholly within the new rules, while retaining records for computer assets already subject to the scheme. Businesses making exempt or non-business supplies should also review their partial-exemption methodology.

Property expenditure should be considered alongside construction cost inflation and contractor margins, capital allowances and land remediation relief. Accurate capital records can also become important during due diligence. Missing or inconsistent information may require forensic accounting support, while property-related financial pressure may call for business restructuring advice.

Get your position confirmed

Ask SCC Chartered Accountants in the UK and Ireland to review your capital asset register and expenditure dates. The SME accounting and business solutions team can identify which items remain within the scheme, which fall outside it and whether any VAT adjustments are required before your next return.