Jurisdiction(s):
United Kingdom

UK VAT Capital Goods Scheme in Property Transactions: Practical Checklist for TOGCs, Options to Tax, Leasing, Adjustments and Contract Clauses

Published by a LexisNexis Tax expert

Checklists

What is the capital goods scheme?

The capital goods scheme (CGS) offers a method to adjust, over a defined timeframe, the VAT initially incurred on substantial capital outlay. For property, that timeframe is ten years and applies where expenditure of £250,000 or more has been made. The adjustment mirrors changes in taxable use during the relevant period. For a more detailed overview, see Practice Note: VAT—capital goods scheme (CGS).

When should a property lawyer be alert to the CGS?

CGS considerations can arise in the following situations:

the sale or purchase of commercial property, residential property, relevant charitable property (RCP) or relevant residential property (RRP)
acquiring a property that qualifies as a transfer of a going concern (TOGC)
granting a lease where the option to tax has not been, cannot be, or is disapplied

In each case, this concerns a property within the CGS, typically one where a VAT-registered party has incurred £250,000 or more (excluding VAT) of capital expenditure on its acquisition, construction, refurbishment, alteration or extension (a CGS Property).

What enquiries need to be raised with a seller?

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Ronnie Brown

Burness Paull

Ronnie Brown is Head of Corporate Tax at Burness Paull LLP. In addition to advising on tax aspects on a wide range of corporate and real estate transactions, Ronnie chairs the Law Society of Scotland’s Business and Property Tax sub-committee and is a member of its Working Party on LBTT. He is also a member of the Stamp Taxes Practitioners Group, the Scottish Property Federation, the VAT Practitioners Group and STEP....

Web page updated on 20/05/2026

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