Spring 2025 Tax Update: Key VAT Reforms
30 April 2025| CATEGORIES: Customs, reform, simplification, VAT| TAGS: business donations to charity, Capital Goods Scheme, Online marketplaces, Temporary admission relief
The UK Government’s Spring 2025 Tax Update outlines a series of measures focused on simplifying tax processes, modernising tax administration, and closing potential gaps in the system. Several of the changes directly impact VAT. The main VAT reforms are highlighted below.
Simplification of the Capital Goods Scheme (CGS)
The Capital Goods Scheme (CGS), which governs VAT recovery adjustments on capital assets over time, is being simplified:
- Computers will be removed from the scheme entirely. Businesses will therefore no longer need to apply capital goods VAT adjustments to IT equipment.
- The threshold for land, buildings and civil engineering works is rising from £250,000 to £600,000 (excluding VAT). This is a welcome simplification that will reduce CGS obligations for mid-sized capital projects.
Changes to Temporary Admissions Relief
The update confirms simplifications to Temporary Admissions (TA) relief. These measures will:
- Extend the time limits for re-exporting goods temporarily imported without VAT/duty.
- Remove some restrictions on who can use the procedure and what they can do with their goods.
- Reduce documentation requirements.
Improved HMRC guidance on the relief will also be published.
Full details of the targeted improvements and simplifications are included in the government’s recently published response to the 2023 call for evidence on Temporary Admission.
Consultation: VAT on Business Donations to Charity
HMRC has opened a consultation on the VAT treatment of business donations of goods to charity. The consultation seeks views on a new VAT relief aligning the treatment of goods donated for distribution to those in need or use by the charity in the delivery of their services, with the existing relief for goods donated for onward sale.
Businesses engaged in charitable donations should consider engaging with the consultation.
Reform of VAT Rules for Online Marketplaces
The government is examining potential further reforms to VAT rules for online marketplaces to close avoidance loopholes and increase fairness between domestic and overseas sellers. This follows the 2021 reforms that made platforms liable for VAT on certain cross-border sales. However, some compliance challenges remain, and the government will therefore explore, including through engagement with stakeholders, the merits and value of further reform to these rules.
Stakeholders who wish to register their interest in engaging with the government on this issue should email onlinemarketplaceliability@hmtreasury.gov.uk
For full details of all the tax measures announced see HMRC’s Policy Paper Spring 2025 Tax Update – Simplification, Administration and Reform Summary.