VAT simplification announced for businesses investing in major assets

Businesses investing in equipment, property or construction projects will see changes to VAT rules from 29th July 2026.

The Government is making changes to the Capital Goods Scheme (CGS), a VAT mechanism that can require businesses to review their VAT claims over several years when they purchase certain high-value assets.

The update is designed to reduce the number of businesses that need to carry out ongoing VAT adjustments, making compliance more straightforward.

What is changing?

From 29th July 2026:

• Computer equipment will be removed from the scope of the Capital Goods Scheme.
• The value threshold for land, buildings and civil engineering works will increase from £250,000 to £600,000 (excluding VAT).

This means fewer business purchases will fall within the scope of the scheme, reducing the need for businesses to monitor VAT recovery over an extended period.

Why does this matter?

The Capital Goods Scheme was designed to ensure VAT claims remain accurate when the use of significant assets changes over time.

For example, where a business purchases a property and its use later changes, the original VAT recovery position may need to be reviewed. The CGS allows these adjustments to be made over a set period.

With the updated rules, many businesses will have fewer compliance requirements when purchasing assets that fall outside the revised thresholds.

What should businesses consider?

Businesses planning significant investments should factor these changes into their VAT planning, particularly where property purchases, development projects or large-scale investments are involved.

Although the changes will simplify administration for many organisations, it remains important to understand how VAT rules apply before committing to major expenditure.

Get in touch for support

If your business is considering a major investment, now is a good time to review your VAT position and understand how these changes could affect you.

Speak to the Verallo team for practical advice tailored to your business.