Input tax on new dwellings
Although the first grant of a major interest in a dwelling is zero-rated, housebuilders are not able to recover all the VAT they incur on building such a dwelling. As an anti-avoidance measure, intended to ensure that the final consumer does not acquire certain domestic fixtures and fittings free of VAT, housebuilders are not able to recover VAT on some items which are sometimes supplied as part of a new house. In the main, these non-recoverable fixtures and fittings are fitted furniture, some electrical appliances and carpets. (See V6.197–V6.200 for a more detailed explanation.)
Capital Goods Scheme
The Capital Goods Scheme (CGS) was introduced by HMRC to deal with the very real problem of input tax incurred on an asset which was used to make both taxable and exempt supplies, and the usage fluctuated over the life of the asset. It was intended to ensure that businesses could not acquire large capital assets, recover the input tax on the grounds that they (initially) made taxable
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Web page updated on 17 Mar 2025 14:20