Capital Goods Scheme

Capital Goods Scheme

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I have a friend who runs an accounting firm and has a new client who needs some help. The client has spent over £250k on the planning and construction works related to an old commercial building and has just opted to tax the property after spending two years on construction work. I understand how the Capital Goods Scheme works, particularly with new acquisitions. However, when there are construction works spanning over two years, at what stage do you apply Capital Goods intervals? The initial amount claimed in year one is different from year two, as there were new bills to pay in year two. Please note this is treated as a whole for CGS purposes, not multiple refurbishments. The client has been claiming VAT based on the expected usage of the building after completion, which was opted to tax upon completion with an expected taxable usage of 80%.

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By Jason Croke
05th Mar 2024 11:47

Regulation 114(4), the first interval commences on the day when the owner first ‘uses’ the capital item. This is the point when the client recognises an asset is in the CGS.

For alteration/refurbishment, "use" usually means the first use of it after works have been completed. For staged projects, the interval might start before the work has been completed, depends on the facts of the situation.

Para 6.4

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