Andrew Needham looks at the workings of the capital goods scheme.
The capital goods scheme (CGS) is a method of adjusting VAT recovery in line with taxable use. It can cause complications for businesses.
What’s covered by the CGS?
The CGS is designed to adjust the input tax recovered by partially exempt businesses and businesses that have both business and non-business income on specified assets above a certain level over either a five or ten-year adjustment period depending on the asset, in order to reflect the taxable use of that asset. The adjustment calculations have to be carried out annually on the second return following the partial exemption year-end.
If you use or intend to use the asset partly for making taxable supplies and partly for making exempt or non-business supplies,
