UK Capital Goods Scheme Simplifies from 29 July 2026: £600k Threshold and No More IT Assets

On 7 July 2026 HM Revenue & Customs published the Value Added Tax (Amendment) Regulations 2026 (SI 2026/765), giving effect to Capital Goods Scheme (CGS) simplifications first announced at Tax Update 2025. From 29 July 2026 two changes take effect: computers and computer equipment are removed from the scheme entirely, and the expenditure threshold for land, buildings, and civil engineering works rises from £250,000 to £600,000 exclusive of VAT.

For VAT-registered businesses planning capital spend this summer, the commencement date matters. Assets where any relevant capital expenditure was incurred before 29 July 2026 remain under the old rules — including the £250,000 threshold and five-year CGS adjustment periods for IT equipment.

The CGS adjusts initial VAT recovery on certain capital assets over multiple years. If the proportion of taxable supplies changes during the adjustment period — ten years for land and buildings, five years for other assets — businesses reclaim additional VAT or repay amounts previously recovered.

The scheme has long been criticised for administrative burden on SMEs. ICAEW recommended limiting CGS to property purchases only in its response to the 2019 call for evidence. The July 2026 reforms deliver much of that simplification for computers and mid-size property projects.

Aircraft and ships remain in CGS at existing thresholds. Only land, buildings, civil engineering works, aircraft, and ships continue after 29 July — with property now requiring £600,000 or more of VAT-bearing capital expenditure to enter the scheme.

From 29 July 2026, capital expenditure on computers and items of computer equipment falls outside CGS regardless of value. VAT recovery follows normal input tax rules — one-off recovery at the time of purchase based on your partial exemption method, with no five-year use monitoring.

Server hardware, laptops, desktops, and associated computer equipment purchased after commencement date avoid CGS tracking entirely. Shoosmiths and ICAEW both note this removes a common pain point for growing businesses refreshing IT infrastructure.

If you incurred any relevant expenditure on a computer asset before 29 July 2026, the old rules continue for that item through its remaining adjustment period.

Land, buildings, and civil engineering works enter CGS only when VAT-bearing capital expenditure reaches £600,000 exclusive of VAT — up from £250,000. Refurbishments, fit-outs, and smaller property acquisitions below the new threshold recover VAT upfront without ten-year adjustment obligations.

Self-storage facilities referencing regulation 113A also adopt the £600,000 threshold from 29 July. Property developers and landlords with partial exemption should model whether projects straddling the commencement date trigger CGS under old or new rules.

The government estimates the changes reduce complex CGS calculations for smaller businesses while preserving the scheme for large property investments where use changes over a decade remain material to VAT recovery.

Review capital expenditure pipelines for July and August 2026. Delaying computer purchases until after 29 July removes CGS tracking; accelerating property spend before that date may keep a sub-£600,000 project under the old £250,000 threshold if any relevant expenditure is incurred first.

Update VAT recovery spreadsheets and partial exemption calculations to reflect assets leaving CGS. Train accounts payable teams that IT invoices no longer require five-year use monitoring from August onward.

FinnAccountings tracks capital asset VAT recovery and flags when expenditure approaches CGS thresholds — start a free trial to keep property and IT capital spend aligned with the 29 July rule change.