Modular VAT review
The Capital Goods Scheme (“CGS”) monitors certain assets that are not wholly used for making taxable supplies (subject to VAT at the standard, reduced or zero rates). VAT would normally be recovered in line with the business’ partial exemption calculation at the time of purchase. If the extent of taxable use changes, there may be additional VAT to reclaim or a repayment to HMRC.
Business that have purchased computer equipment, aircraft, ships or other vessels in the last 5 years with a value in excess of £50,000 need to monitor the use of these assets.
A far more common scenario is businesses that have spent in excess of £250,000 on land, buildings or renovations in the last 10 years. Given this longer period and the fact that the VAT at stake will be more significant this is a greater area of risk for the business.
Particular care needs to be taken when selling an asset that is subject to the CGS as an unexpected VAT charge may bite.
There is more opportunity to protect the business from VAT risks if the VAT implications of a transaction are considered in advance.
Review your CGS calculations will ensure the scheme is being operated correctly, could identify opportunities to increase VAT recovery and prevent any unexpected VAT bills on the disposal of assets subject to the scheme.
- If in point needs to follow partial exemption so we already have ‘taxable use’ calculated.
By adopting a modular approach to your VAT review you are able to take control so you can:
- focus on the specific areas of risk
- address your VAT concerns
- manage/spread the cost of the review
- control the timing of each module so you can prioritise key modules and schedule the progress of the review to fit in with your business
Next steps
Get in touch today to discuss how we can work with you to keep VAT becoming a headache for your business. Our modular VAT review is comprised of the following elements which you can pick and mix over an agreed period of time. The only mandatory element is module one which is the initial scoping element.
- module one: scoping meeting (mandatory element)
- module two: liability of supplies
- module three: expenditure
- module four: partial exemption
- module five: capital goods scheme
