In most scenarios, when an asset is purchased, the amount of input tax recovery permitted is fixed in the year in which the purchase takes place. However, certain high value assets are subject to the Capital Goods Scheme (CGS) and input tax recovery must be adjusted over the first five or 10 years of the asset’s ownership.

But if the asset is sold before the scheme expires, a potentially significant VAT payment or repayment may result.

The CGS affects land and buildings on which capital expenditure of £250,000 or more has been incurred and single items of computer equipment, planes, ships and other vessels on which capital expenditure of £50,000 or more has been incurred.