Whilst news on the plans to raise the capital expenditure threshold from £250k to £600k was made in the Spring Statement we were not given a date as to when the new threshold of £600k would apply and how on-going projects would be affected.
The latest information is that the threshold will rise to £600,000 from the 1st April 2026 and will apply to any capital expenditure on:
- buying land or
- property or,
- building a new property or
- refurbishing or extending an existing property,
where the spend that attracts VAT at either the reduced or standard rate, exceeds £600,000 within the overall project cost. The Capital Goods Scheme or CGS, doesn’t affected assets bought for resale but does pick up property held as head offices or business operation sites as well as assets that are leased out in whole or part. It applies to any organisation – corporate or not for profit bodies – where the spend and use criteria is triggered.
CGS brings the requirement to monitor the taxable business use of the asset for a 10 interval (years effectively) period and if the original taxable use percentage established goes up or down in that year, then an annual VAT adjustment will be triggered.
There are rules as to when the CGS period starts from which will be important for those affected to understand as the news is that the increased threshold will be applied to projects that trigger a CGS start date after the 1st April 2026.
When VAT gets complicated – as it does in CGS projects – then do get in touch with Xeinadin’s VAT Advisory team and expert help can be provided.
