The Capital Goods Scheme (CGS) requires that every property owner creates and maintains a ‘Capital Good Record’ (Section 64(12) and Regulation 27(1)(v)VAT Regulations 2010), for each developed property (capital good) they own. It is effectively a VAT passport for the property. Properties cannot be sold without it. Findings suggest that over 80% are not compliant, shockingly the vast majority do not even understand what the requirements are and in many cases their Accountant has not brought this to their attention due to lack of expert knowledge. They will soon know as are Revenue intend to crack down on this in 2016.
The Capital Goods Record must contain the following information about the property –
- The amount of VAT charged in relation to the owner’s acquisition or development of the property. (This is known as the ‘total tax incurred’).
- The amount of the VAT charged that was deducted initially.
- The date on which the adjustment period begins (date of acquisition, where the property was acquired or date of completion of development where property was constructed or refurbished).
- The number of intervals in the adjustment period. This may be 10 or 20 depending on the situation.
- The Initial Interval proportion of deductible use, i.e. the percentage of taxable use for the first 12 months.
- The total reviewed deductible amount, i.e. total tax incurred multiplied by the percentage of taxable use for the initial interval.
- The proportion of deductible use for each interval, i.e. the percentage of taxable use for each interval (second, third, fourth, etc).
- Details of any adjustments under the scheme.
- Details of any sale of the property.
Failure to create and maintain a Capital Good Record for each capital good is liable to significant penalties and fines.
In the case of a property that has been refurbished there may be two or more capital goods attributable to that property. A ‘Capital Good Record’ must be created and maintained for all capital goods that a taxpayer has. If you are unsure of your requirements you should contact your Accountant or Contact Patrick O’Rourke or Pat Sutton of O’KellySutton of O’KellySutton 045 530777 who are experts in this area.