HMRC has moved to narrow the scope of the VAT capital goods rules, with the Value Added Tax (Amendment) Regulations 2026 made on 7 July 2026, laid before the House of Commons on 8 July 2026 and due to take effect on 29 July 2026. According to the statutory instrument published on legislation.gov.uk, the practical change is a higher entry point for certain property and infrastructure assets, alongside the removal of computers from the regime. For finance teams, this matters because Part 15 of the Value Added Tax Regulations 1995 can create years of follow-up adjustment work after a capital purchase. The change is not about headline VAT rates. It is about which assets must keep being tracked for VAT purposes after the original spend has been made.

The regulations remove a computer or an item of computer equipment from the list of capital items covered by Part 15. They also raise the minimum VAT-bearing capital expenditure threshold for land, a building or part of a building, and a civil engineering work or part of a civil engineering work from £250,000 to £600,000. The same uplift is carried through into the self-storage provision in regulation 113A. In plain terms, fewer mid-sized projects will be drawn into the capital goods scheme. A project with VAT-bearing capital expenditure of £500,000 would previously have crossed the line for property or civil engineering. For new expenditure caught by the new rules from 29 July 2026, it would not.

That does not mean the VAT disappears. Businesses will still need to apply the normal input tax rules, and partial exemption remains a live issue where taxable and exempt activities sit side by side. What changes here is the extra compliance layer that applies once an asset counts as a capital item under Part 15, where VAT recovery may need to be revisited over time if the use of the asset changes. That distinction is especially relevant for property businesses, storage operators, charities with mixed-use premises and firms commissioning civil engineering works. Where the mix between taxable and exempt use can move over several years, staying outside the scheme can make budgeting and record-keeping much easier.

From a cash-flow and planning angle, the new £600,000 threshold could give firms a little more certainty around investment decisions. A warehouse extension, office refurbishment or site infrastructure package that falls between £250,000 and £600,000 will no longer bring the same long-tail VAT monitoring requirements, provided the expenditure falls within the new date rules. Projects above £600,000, by contrast, still remain inside the regime. For smaller developers and owner-managed businesses, that is a meaningful administrative saving rather than a tax windfall. The benefit is fewer annual reviews, fewer adjustment calculations and less risk of a technical compliance issue surfacing years after the original invoice was booked.

The date line, though, needs careful handling. Regulation 1(3) says the amendment has no effect for a capital item if the owner incurred relevant expenditure before 29 July 2026 in respect of supplies received before that date, goods imported before that date, or goods acquired from a member State before that date. That leaves a fairly clear message for projects already under way. Businesses cannot assume the higher threshold automatically tidies up work that started under the old rules. If contracts, invoices or imported items straddle the cut-off, finance teams will need a clean audit trail and may still find themselves applying the previous £250,000 test.

The removal of computers and computer equipment is also more than a drafting tidy-up. For new qualifying expenditure after 29 July 2026, those items fall outside Part 15 altogether. That should simplify VAT compliance for businesses making substantial technology purchases, particularly where equipment is refreshed frequently and business use can shift over time. Even so, companies should not over-read the change. VAT recovery on IT spending will still depend on ordinary business use, exemption status and the wider facts of the purchase. The regulations remove one monitoring regime, not every judgement call attached to capital expenditure.

The explanatory note attached to the instrument says a Tax Information and Impact Note will be published on gov.uk, which should give more detail on the policy case and the expected business effect. Even before that arrives, the direction is clear enough: HMRC is choosing a narrower, higher-value test for assets that stay inside the capital goods rules. For firms with live property, self-storage or infrastructure plans, the sensible next step is to revisit project timing, invoice dates and expected VAT recovery before 29 July 2026. This is a technical amendment, but for businesses sitting near the old £250,000 threshold, it could make a real difference to compliance workload even if the broader VAT bill stays much the same.