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Readers' forum : Flat rate dilemmas

23 August 2016
Issue: 4564 / Categories: Forum & Feedback

Can a computer, including software, be treated as capital goods for VAT?

I have just produced year-end accounts for a builder client who uses the flat rate scheme. He bought a computer for £2 120 including VAT but did not claim input tax. I know that a scheme user can claim input tax on capital goods costing more than £2 000 but my client’s purchase invoice shows that Microsoft Office was bought for £180 within the figure of £2 120. So does this mean he is input tax blocked because part of the payment is for software rather than hardware?

Another client who uses the scheme has incurred a bad debt for £2 000 plus VAT. He has never included the sale on a VAT return because he uses the cash-based method of calculation. But I understand there is a potential VAT windfall with the scheme rules – is this correct and what are the conditions and amounts?

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