The Value Added Tax (Amendment) Regulations 2026 were made by the Commissioners for His Majesty’s Revenue and Customs on 7 July 2026, laid before the House of Commons on 8 July, and will come into force on 29 July. The instrument amends Part 15 of the Value Added Tax Regulations 1995, the part of the VAT rulebook that identifies which high-value assets fall within the capital goods scheme. The legislation.gov.uk text shows two substantive changes. Computers and computer equipment will be removed from the list of capital items covered by Part 15, while the expenditure threshold for land, buildings and civil engineering works will rise from £250,000 to £600,000.
This is not a change to VAT rates. It is a change to the adjustment regime for input tax on specified capital assets, where recovery can be revisited over time if the use of an asset changes between taxable, exempt or other activities. That distinction matters for businesses, charities and other organisations with mixed activities. The regulations narrow the range of assets that must be monitored under Part 15 after 29 July 2026, with the clearest effect falling on IT purchases and on property or infrastructure expenditure that sits below the new threshold.
The drafting change is centred on regulation 113 of the 1995 Regulations. Regulation 2(2)(a) omits regulation 113(2)(d), which is the provision that currently brings a computer or an item of computer equipment within Part 15. Linked references in regulation 113(3)(a) are removed at the same time, and regulation 114 is amended so that the adjustment-period rule no longer refers to computers. The property change is equally direct. In regulation 113(4)(a), the minimum VAT-bearing capital expenditure for land, a building or part of a building, and a civil engineering work or part of such a work, is increased from £250,000 to £600,000. Regulation 113A applies the same £600,000 figure to the related self-storage provision.
The commencement rule is one of the most important features of the instrument. Regulation 1(3) states that regulation 2 has no effect for a capital item where the owner incurred relevant VAT-bearing capital expenditure before 29 July 2026, whether through a supply, an import, or goods acquired from a member State. In practical terms, that transitional protection keeps the old treatment in place for items where expenditure has already been incurred before the start date. For live projects, the legal question is not simply when the asset is completed or brought into use. The timing of the relevant expenditure on the capital item will be central.
For businesses acquiring computers or computer equipment on or after 29 July 2026, the amendment should mean that those assets no longer enter capital goods scheme tracking unless the transitional rule preserves the earlier treatment. That will be especially relevant where input tax recovery is sensitive to mixed taxable and exempt use. For land, building and civil engineering expenditure, the higher £600,000 threshold means fewer assets will qualify as capital items going forward. Expenditure that would previously have been caught once it crossed £250,000 will now fall outside Part 15 if it remains below £600,000, subject again to the transitional rule for earlier expenditure.
The compliance effect may be modest for some organisations, but it will not be automatic. Businesses with live capital projects will need to review invoice dates, import dates and acquisition dates against the commencement provision. Where expenditure has been phased, different assets or work packages may need separate treatment. Internal VAT manuals and capital project controls may also need updating before 29 July 2026. Asset registers, partial exemption working papers and approval processes that still assume a £250,000 property threshold, or include computer equipment within Part 15, will need to reflect the new legal position.
The explanatory note on legislation.gov.uk presents the measure as a targeted amendment rather than a wider rewrite of VAT recovery rules. The regulations do not alter VAT rates. They change which capital items enter the Part 15 adjustment regime and when that regime applies. The same note states that a Tax Information and Impact Note will be published on gov.uk. That document should set out the expected administrative and Exchequer effects in more detail, but the legislation already gives affected organisations a clear implementation date: 29 July 2026.