VATWatch - May 2025
Changes to CGS
I go away on holiday for three days and come back to this massive announcement from HMRC on the Capital Goods Scheme:
“Capital Goods Scheme simplification:
The government will simplify the Capital Goods Scheme by introducing the removal of computers from the assets covered by the scheme and increasing the capital expenditure value of land, buildings and civil engineering work to £600,000 (exclusive of VAT). This simplification will reduce the number of capital assets that would fall within the Capital Goods Scheme, therefore reducing the administrative burden on small businesses.”
The limit has been £250,000 for ever so this is a huge change which is very welcome. It was recommended by the OTS back in 2017 so it’s great to see it finally happening.
I’ll share more details once they are available.
Care Home VAT Groups
HMRC has identified a growing use of VAT grouping structures by state-regulated care providers to recover VAT on costs that relate to supplies of welfare services that would otherwise be exempt from VAT.
These structures incorporate an unregulated entity into the supply chain between the state-regulated provider and the local authority or NHSÂ ICBÂ to which the supply is made. Identical supplies made to private individuals remain exempt from VAT.
HMRC consider these VAT grouping structures to be a form of tax avoidance and will take actions with immediate effect.
Flat Rate Scheme
HMRC has published some research into attitudes towards the FRS.
Consultation on the VAT Treatment of Business Donations of Goods to Charity
The consultation seeks to understand more about the types of goods most commonly donated, how they are distributed, and if there is scope to balance the need to prevent tax evasion with the need to avoid burdensome administrative requirements.
The consultation will seek views on the scope of a relief, eligible goods, and the design of its administration, among other topics. HMRC are keen to hear from a broad range of businesses and charities who make and receive donations.
Thank you for taking the time to read this VATwatch round-up.
