Aug
Changes to the Capital Goods Scheme in the UK
Who this will interest: UK businesses under the Capital Goods Scheme;
Key point(s): The UK Government has made amendments to the Capital Goods Scheme. The threshold for land, building and civil engineering works has been increased from £250,000 to £600,000 and some items have been removed from the list of capital goods items.
Essentia’s take: This is a welcome refreshment of the frankly dated threshold and rules.
Action points: Businesses already falling under the Capital Goods Scheme should check the new rules.
In detail
The UK has made changes to its Capital Goods Scheme as of 29 July 2026. The Capital Goods Scheme is a set of rules meant to ensure that VAT on certain assets is recovered based on how they are being used over a certain period of time. If the assets are used entirely for activities that are taxable then full recovery is allowed. If the assets are used for exempt or non-taxable activities then recovery is allowed only in line with the percent of taxable usage.
The scheme applies only to particular types of assets:
- land, buildings and civil engineering works where capital expenditure was £250,000 or more, excluding VAT
- computers and computer equipment where capital expenditure was £50,000 or more, excluding VAT
- aircraft, ships, boats and other vessels where capital expenditure was £50,000 or more, excluding VAT
From 29 July 2026 a number of updates have been made:
- computers and computer equipment have been removed from the list of capital assets;
- the threshold for land, buildings and civil engineering works has been increased from £250,000 to £600,000;
If a capital item already falls within the Capital Goods Scheme under the threshold that applied before 29 July 2026, it will stay in the scheme until the end of its adjustment period. The new £600,000 threshold applies to land acquired on or after 29 July 2026, and to buildings and civil engineering works acquired, constructed, refurbished, fitted out, altered or extended on or after that date.
You can read more on HMRC’s website here.