Value Added Tax Consolidation Act 2010 section 64

Capital goods scheme

Section 64 sets out the detailed rules for the operation of the capital goods scheme (CGS), which requires annual reviews of the taxable and exempt use of property over a 20-year (or 10-year) adjustment period, with VAT deductibility adjusted to reflect changes in use.

• The CGS adjustment period is 20 intervals for a new capital good and 10 intervals for a refurbishment; at the end of each interval, the owner compares actual taxable use with the benchmark established in the initial interval and pays or reclaims the difference on a one-twentieth (or one-tenth) basis.
• Where taxable use changes by more than 50 percentage points compared with the initial interval, a "big swing" adjustment is triggered based on the full remaining VAT life rather than a single interval, and the benchmark figures are rebalanced for subsequent intervals.
• Special rules apply to sales (taxable and exempt), transfers of business, landlord lettings (exercising or terminating the option to tax), tenant refurbishments, connected-person transactions, and the appointment of receivers or mortgagees in possession.
• CGS obligations can be passed on to a purchaser, assignee or transferee by written agreement in certain circumstances, and the capital goods owner must create and maintain a capital good record for each capital good.