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The Capital Goods Scheme

Continuing this series of basic informative articles Peter Hewitt Ernst & Young LLP explains the adjustment of VAT recovery for capital items under the special Capital Goods Scheme
In principle the arrangements for the UK capital goods scheme seem to be fairly straightforward. The purpose is to enable adjustments to the initial input tax recovery so as to take into account change of use of a capital item over the adjustment period where the item has a useful life of more than one year. However anyone who has been called upon to carry out an adjustment will realise that the practicalities of making the calculation can be mind-boggling. HMRC (Customs) also realised this before the scheme was introduced and thankfully they decided it should apply to a limited range of...

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