Capital goods scheme

Capital goods scheme

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Trading company acquires new freehold building and reclaims input tax. 5 Years on we are looking at reorganising the company such that the freehold is held by the original company but the trading activity (unchanged) is carried out by a new company. If the original company does not opt to tax and only makes an exempt supply of rent to the new trading company does this trigger an input tax adjustment under the capital goods scheme? I think it does but all of the HMRC examples seem to examine a change in the use of the building which in essence there hasn't been. There is no problem with an option to tax as all parties are VAT registered but just curious.

Thanks.

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By spidersong
15th May 2013 11:37

Change of Use?

It's a change of use by the entity holding the building, it's not what the building itself is used for it's what the company uses it for:

Company A is trading for 5 years using the building for it's trading

Then Co.A is no longer trading and is using the building as a rental property.

Trading occupation vs landlord = change of use.

 

This sort of thing is not uncommon with pubs where the landlord might change his occupation and become a........ landlord instead.

And yes unless you maintain taxable use of the building then there is a CGS adjustment needed.

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By Steve Holloway
15th May 2013 12:18

Many thanks ...

clear and concise.

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