Capital goods scheme (CGS) ― dealing with the disposal of assets and other areas of difficulty

Produced by a Tolley Value Added Tax expert

Value Added Tax

Guidance

This guidance note examines how to apply the CGS when assets are disposed of within the adjustment period, as well as some other common areas of difficulty.

For an overview of the CGS more broadly, see the Capital goods scheme (CGS) ― overview guidance note.

For detail on how CGS adjustments are calculated, see the Capital goods scheme (CGS) ― intervals and adjustments guidance note.

In-depth commentary on the CGS can be found in De Voil Indirect Tax Service V3.470.

When are CGS adjustments required?

In broad terms, the CGS requires that the use of certain ‘capital items’ is monitored over a period of time (otherwise known as an ‘adjustment period’). If, during this adjustment period, the use of the capital items changes then an adjustment must be made to the amount of input tax which was initially recovered on the capital item. This adjustment is designed to reflect the change in the way that the capital item is being used.

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