The Value Added Tax (Amendment) Regulations 2026 modify the Capital Goods Scheme by amending the Value Added Tax Regulations 1995.
These regulations remove computer equipment from the list of capital items subject to input tax adjustments and increase the minimum expenditure threshold for land, buildings, and civil engineering works from £250,000 to £600,000.
These changes apply to VAT-registered owners of capital items in the United Kingdom, specifically those incurring capital expenditure on or after July 29, 2026.
Arguments For
The explanatory note states that the regulations modify Part 15 of the Value Added Tax Regulations 1995 to remove computers and computer equipment from the defined list of capital items.
The document indicates that the threshold for VAT-bearing capital expenditure regarding land, buildings, and civil engineering works is being increased from £250,000 to £600,000.
The instrument provides transitional arrangements to ensure the new rules do not apply to capital items where expenditure was incurred before July 29, 2026.
Arguments Against
Tax practitioners may find that the removal of computer equipment from the Capital Goods Scheme complicates the tracking of input tax for assets currently within their adjustment periods.
Small to medium-sized enterprises (SMEs) may express concern that increasing the threshold to £600,000 alters the eligibility for input tax adjustments on significant property investments previously covered under the £250,000 limit.
Administrative bodies or affected businesses might identify implementation difficulties regarding the precise cut-off for "relevant expenditure" incurred right at the commencement date of July 29, 2026.
- —(1) These Regulations may be cited as the Value Added Tax (Amendment) Regulations 2026.
(2) These Regulations come into force on 29th July 2026.
(3) Regulation 2 has no effect in relation to a capital item if the owner incurred any relevant expenditure on or in relation to that capital item in respect of—
(a) goods or services supplied to the owner before 29th July 2026,
(b) goods imported by the owner before 29th July 2026, or
(c) goods acquired from a member State by the owner before 29th July 2026.
(4) In this regulation—
‘capital item’ has the meaning given in regulation 112(2) of the Value Added Tax Regulations 1995 (interpretation of Part 15), as determined immediately before regulation 2 came into force;
‘owner’ has the meaning given by regulation 112(2) of the Value Added Tax Regulations 1995;
‘relevant expenditure’ means VAT bearing capital expenditure of a type specified in regulation 113(3) of the Value Added Tax Regulations 1995, as that provision read immediately before regulation 2 came into force.
This section establishes the title of the regulations and sets the commencement date as July 29, 2026.
It creates a transitional exception, stipulating that the substantive changes in Regulation 2 do not apply to capital items where the expenditure occurred prior to the commencement date via supply, importation, or acquisition from an EU member state.
Definitions for 'capital item', 'owner', and 'relevant expenditure' are provided to maintain consistency with the existing 1995 regulatory framework.
- —(1) The Value Added Tax Regulations 1995 are amended as follows.
(2) In regulation 113 (capital items to which Part 15 applies)—
(a) in paragraph (2), omit sub-paragraph (d);
(b) in paragraph (3)(a), omit ‘or (d)’;
(c) in paragraph (4)—
(i) in sub-paragraph (a), for ‘£250,000’ substitute ‘£600,000’;
(ii) in sub-paragraph (b), for ‘(2)(d), (e) or (f)’ substitute ‘(2)(e) or (f)’.
(3) In regulation 113A (grant of facilities for the self storage of goods under item 1(ka) of Group 1 of Schedule 9 to the Value Added Tax Act 1994), in paragraph (2)(a), for ‘£250,000’ substitute ‘£600,000’.
(4) In regulation 114 (period of adjustment), in paragraph (3)(b), for ‘regulation 113(2)(d) to (f)’ substitute ‘regulation 113(2)(e) or (f)’.
This section carries out the primary legal changes to the 1995 Regulations by removing computer equipment from the definition of capital items under the Capital Goods Scheme.
It increases the value threshold for land and building assets from £250,000 to £600,000, meaning only assets above this higher value are subject to the adjustment rules.
Additionally, it makes conforming technical updates to regulations concerning self-storage facilities and adjustment periods to reflect the removal of computers and the revised value thresholds.
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