Case Studies
Case Study: How VAT Capital Goods Scheme Changes Affect a Mid-Size Property Developer
Recent VAT reforms remove computers from scheme and raise land/building thresholds — this real-world scenario shows how developers can adjust.
By NomadicTax Research Team • 5-8 min read • August 26, 2026
## Overview of the VAT Capital Goods Scheme (CGS)
The CGS allows VAT-registered businesses to claim VAT on certain capital items (land, buildings, civil engineering works, computers) but requires adjustments over time if use changes. Until recently, thresholds were £250,000 for buildings etc., and computers included separately. ([gov.uk](https://www.gov.uk/guidance/capital-goods-scheme-notice-7062?utm_source=openai))
## What actually changed on 29 July 2026
From **29 July 2026**, the government:
- **removed computers and computer equipment** from the CGS scope;
- **increased threshold** for land, buildings and civil engineering works (excluding VAT) from **£250,000 to £600,000**;
- assets already in the scheme remain so until their normal adjustment period end. ([gov.uk](https://www.gov.uk/government/publications/revenue-and-customs-brief-7-2026-changes-to-the-vat-capital-goods-scheme?utm_source=openai))
## Case example: Developer “GreenBuild Ltd.”
### Before change
- GreenBuild builds residential and commercial units, incurring £400,000 VAT-exclusive costs on a land purchase and £150,000 on computer/server equipment for project management. Previously these both would fall under CGS:
- _Land/buildings_ above threshold – yes;
- _Computer equipment_ – above its own threshold.
### After change
- With revised CGS rules: land/buildings still above new threshold (£600,000), so that land cost no longer meets threshold – outside CGS. Computer equipment entirely excluded.
- So GreenBuild can claim full input VAT upfront (if other conditions met) rather than spreading adjustments over many years.
## Impacts and actionable insights
- **Cash flow improvement**: Items now outside CGS allow upfront VAT recovery rather than waiting adjustments over an adjustment period.
- **Less administrative burden**: removing computers simplifies record-keeping and reduces need for allocation between business/non-business use for such items.
- **Reassess investments**: If you were delaying purchases to stay just below thresholds, the rule changes may open up new strategies.
## Practical guidance for businesses
- Review all capital projects and costs after 29 July 2026 to check whether they now fall outside CGS.
- Assets acquired before 29 July 2026 still follow old rules until their adjustment periods end. Track dates carefully.
- For land/building projects, especially those close to new threshold, forecast input VAT recovery under both regimes.
- Discuss with VAT/trade advisor to ensure actual VAT-inclusive policies are applied, especially with mixed use property or where assets move from exempt to taxable use.
## Conclusion
The changes to the CGS from 29 July 2026 offer relief for many businesses previously facing lengthy adjustment periods. By reevaluating their asset purchases and recognising new opportunities, property developers and other VAT-registered businesses can gain cash flow and simplify compliance.