Key VAT updates for July 2026
This month’s update covers several significant VAT developments announced by HMRC, including the implementation date for changes to the Capital Goods Scheme, measures to digitise the option to tax process for land and property, a new consultation on the treatment of development land for social housing, and the decision to adopt Peppol as the platform for the introduction of electronic invoicing. We explore each of these developments and consider what they mean for businesses.
A note from Nick Hart, VAT Partner
Some welcome news from HMRC recently as the uncertainty regarding when the value threshold for land and property assets would increase to £600,000 has been put to bed – the value increases from 29 July 2026. Equally as welcome is the news that HMRC aims to digitise the process for opting to tax. It’s hoped this prompts much needed efficiencies, to enable transactions to complete more smoothly where opted land/property is involved.
The positive news of the consultation on development land for social housing is a key highlight in particular for my fellow Saffery VAT Partner, Sean McGinness, who has been lobbying for change in this area for many years. Finally, businesses can now take proactive and positive steps on their journey to adoption of electronic invoicing now that Peppol has been announced as the core interoperability network for e-invoicing.
Capital Goods Scheme: changes take effect from 29 July 2026
The Value Added Tax (Amendment) Regulations 2026 (SI 2026/765) introduce two previously announced changes to the Capital Goods Scheme (CGS) with effect from 29 July 2026.
Computers and computer equipment will be removed from the scope of the scheme altogether, and the expenditure threshold for land, buildings and civil engineering works will increase from £250,000 to £600,000 (exclusive of VAT). These measures were announced as part of the Government’s tax simplification package in April 2025, although the commencement date has only recently been confirmed. For more information see HMRC’s policy paper: Simplification of the Capital Goods Scheme.
On the increase to £600,000, if any capital expenditure on a qualifying asset was incurred before 29 July 2026, the existing £250,000 threshold will continue to apply to that asset.
Comments
We have been awaiting announcement to the planned changes to the CGS since the proposal was first announced over a year ago. The removal of the computer asset class from the CGS is something of a ‘no-brainer’, and the increase of the land/property qualifying threshold to £600,000 is welcomed, although many had called for a higher threshold.
The only transitional point mentioned in current published guidance is to confirm that if any capital expenditure was incurred before 29 July 2026, the existing £250,000 threshold will still apply.
Businesses may wish to delay incurring any capital expenditure for the first time on a new qualifying capital asset until 29 July 2026, where expected total spend will be less than £250,000, but only if it suits based on current intentions regarding the use of the asset over the next 10 years. Taking advice now is recommended.
Digitising options to tax
As part of the Tax Update 2026 published by HMRC on 23 June 2026, it was announced that before the end of the calendar year a new online portal will be launched for option to tax matters.
In line with the general approach to digitise compliance services, the new portal will enable the following to be completed digitally:
- Election notifications including a bulk upload facility.
- Revocation notifications.
- Submission of option to tax information associated with VAT deregistration.
Comments
This is a positive, and will make some of the administration around option to tax elections more efficient. However, it’s unlikely going to have an impact on what has previously been notified to HMRC in terms of tax payers having clarity over what has and has not been opted to tax, particularly if elections would have been made some time in the past. Available and conclusive option to tax paperwork enables transactions to complete smoothly, but the opposite often means costly delays to transactions completing, and the parties involved proceeding with a degree of risk and uncertainty where the position is unclear.
A digitised record will be a welcome development and may help address some of the practical challenges associated with the current process.
VAT consultation on development land for social housing
Another matter announced in the 2026 Tax Update, was a consultation on the VAT treatment of land intended for the construction of new social housing. Our Head of VAT and National Tax Partner, Sean McGinness, has been closely involved in the development of these proposals, working with clients, HMRC and HM Treasury for five years on them.
Comments
Under current rules, zero‑rating typically only applies to the sale of land for new dwellings once construction has progressed beyond foundation level (the ‘golden brick’ stage). This can create complexity in transaction structures and affect the timing of land transfers, with registered providers often unable to take title earlier in the development process. A further point to note here is that it’s each building that is being sold that needs to be above foundation level – this increases the complexity of selling multi-phase sites to registered providers of social housing.
The consultation explores the introduction of a targeted zero rate for the sale of land to registered social housing providers at an earlier stage. The aim is to reduce barriers to development, simplify arrangements and support the delivery of social housing.
The consultation also seeks views on the scope of the relief, including eligibility criteria and the use of certification or other safeguards to ensure it’s appropriately targeted and not open to misuse. For further background on the issues with the current rules, see Sean’s article on the VAT reform needed to drive affordable housing delivery
Please do get in touch with Sean to discuss further.
HMRC announces Peppol as the core interoperability network for e-invoicing
HMRC has confirmed that Peppol will be the core interoperability network for the UK’s planned 2029 e-invoicing mandate. While expected, given it was used in the public sector already, this announcement provides important clarity. A decentralised, four-corner model aligned to global standards enables businesses, software providers and advisors to begin planning with confidence.
Comments
Peppol is the most prominent global network for the standardised exchange of electronic business documents. It works on a four-corner model basis, in which businesses exchange e-invoices through their service providers, who then communicate with each other, which is what allows for interoperability and flexibility. Multinational businesses and accounting software providers will likely be familiar with it as it’s already used in many EU countries and beyond.
Please get in touch with Nick Hart, VAT Partner to discuss how your business should be planning for electronic invoicing now. Our article on the UK e-invoicing mandate and how businesses should be preparing for 2029 may also be of interest.
Is it food?
No interesting food related VAT cases this month to report on, but a reminder that the 5% VAT rate applies to qualifying children’s meals until the end of 1 September 2026.
Reader Q&A
“Electronic invoicing seems a long way off and it’s difficult to plan when so much of the detail behind it has yet to be announced. Is there anything that we should be thinking about now Peppol has been announced at the chosen platform, or is it still too soon?”
Nick Hart, VAT Partner:
Confirmation from HMRC that Peppol is the chosen platform for electronic invoicing mandatory adoption, is helpful and enables business to take stock and begin some foundational preparations for 2029.
We’re advising business to take the following steps now to being the process of e-invoicing adoption:
- An internal data qualify review – how good is your accounting/sales/purchases/tax data? It’s time to assess VAT‑critical fields (VAT numbers, invoice data, master customer and supplier data quality)
- Engage with software providers – understand Peppol readiness and roadmap. Fortunately, many software providers and e-invoicing intermediaries are already familiar with Peppol
- Build awareness – finance, tax and IT alignment will be vital to ensure e-invoicing is on the roadmap
- Map current processes – identify where invoicing data is created, transformed or lost
Our team are working with clients on the above matters and supporting them closely through the implementation process as it evolves. Please get in touch to discuss how you can start preparing for e-invoicing and head to our article outlining the initial steps business should be taking ahead of implementation.
Submit your question for September’s VAT Update
VAT Update is scheduled to take a summer break in August, but please do send over questions which we can address in our September VAT Update.
How Saffery can help
Thank you for reading this month’s update. We share these insights each month to help you stay ahead of developments that could shape your compliance, planning and day‑to‑day business operations.
If you’d like support with any aspect of your VAT position, or want Nick and the team to answer your question in the next edition, simply use the submission form or get in touch to arrange a short advisory conversation.
