Entity Setup
Capital Goods Scheme Made Simpler: What Small Businesses Need to Know
Recent changes in the Spring 2025 tax update simplify rules around capital expenditure, reducing compliance burdens for smaller UK businesses.
By NomadicTax Research Team • 5-8 min read • November 23, 2025
## Overview of the Change
The UK government’s **Spring 2025 tax update** introduced simplifications to the **Capital Goods Scheme (CGS)**, including:
- **Removal** of **computers** from assets covered by the scheme.
- **Raising** the **capital expenditure value threshold** for land, buildings, and civil engineering work to **£600,000 (exclusive of VAT)**. ([gov.uk](https://www.gov.uk/government/publications/summary-of-tax-update-spring-2025-simplification-administration-and-reform/tax-update-spring-2025-simplification-administration-and-reform-summary?utm_source=openai))
## Why This Reform Was Needed
The CGS allows businesses importing or acquiring significant assets to claim credit for VAT paid over multiple accounting periods.
Small to medium-sized businesses often grappled with:
- Complex asset tracking.
- Multiple entries for various asset categories—even low-value items.
- Higher thresholds triggering full scheme compliance.
Removing computers and raising thresholds focus the scheme on larger capital investments, easing administrative burden for many businesses.
## Practical Examples
- **Bakery purchasing ovens**: Large kitchen equipment and civil engineering improvements now clearly fall under the revised threshold. Bakery owners no longer need to worry about minor computer equipment being included in CGS.
- **Construction and renovation firms**: Those spending close to £500,000 were previously subject to full scheme rules. With the threshold raised to £600,000 and computers excluded, compliance workload will decrease significantly.
## Financial & Operational Impacts
- **Medium businesses** with annual capital expenditure between £200,000–£600,000 will see faster VAT recovery processing.
- Cost of compliance—accountant fees, internal bookkeeping—will drop for smaller asset purchases no longer caught by CGS.
## Actionable Steps for Businesses
1. **Review fixed assets**: Re-assess your capital asset inventory; separate computers from other qualifying assets.
2. **Asset purchase timing**: If procurement is expected near year-end, consider waiting if spend under £600,000 to simplify VAT treatment.
3. **Consult VAT/GST advisors**: To ensure claims are maximised while avoiding inclusion of computer-related expenditures unnecessarily.
4. **Update your accounting systems**: Label and track assets differently; prepare asset categories aligned with the new rules.
## Relevance for Entity Setup
Startup or scale-up businesses often include tech hardware in capital-claims workflows. Under the new scheme, computers → no longer require inclusion in CGS. Simplifies both **financial forecasts** and **compliance scenarios** when launching.
## Bottom Line
These CGS reforms represent a step towards reducing complexity for UK small and medium enterprises. For many, it means simpler VAT claims, less paperwork, and clearer planning around capital projects. Stay aware of how your asset purchases align—and adjust accordingly.