Following lengthy consultations the Government has announced two changes to the Capital Goods Scheme that will help businesses, although one change is likely to be of much more relevance than the other.
On 29 July 2026 computers and items of computer equipment will be removed from the scheme. Previously the purchase of a computer, or items of computer equipment, that cost £50,000 or more was treated as a capital goods scheme item. When the Capital Goods Scheme was introduced in 1990 purchases of mainframe computers were more common; now this is much rarer and the application of the Capital Goods Scheme is largely irrelevant.
On 29 July 2026 the threshold for expenditure on land, buildings and civil engineering works, will be increased from £250,000 to £600,000. These figures exclude VAT.
If expenditure has been incurred on these types of items before 29 July 2026 the previous thresholds apply. Therefore, if a building project is in progress at 29 July the previous thresholds may have to be applied in order to determine whether the expenditure is a capital goods scheme item.
If a business is about to purchase an item that falls into the Capital Goods Scheme under the old rules but is below the new threshold, it may be worth deferring the expenditure until after the 28 July.
The Capital Goods Scheme is a VAT scheme that attempts to match the recovery of VAT on certain large items of capital expenditure to their use over a period of time. In addition to the above items the Scheme also applies to expenditure on aircraft, boats and other vessels of £50,000 or more.