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For information of users:
This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm.
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CAPITAL ALLOWANCES
Houses in Multiple Occupation (HMO)
It is generally well known that capital allowances are not available on plant & equipment used in a dwelling house. In relation to houses in multiple occupation, e.g. Student Halls of Residence & similar establishments, it has been HMRC practice not to treat such properties as dwellings. However, on 28 December 2008 HMRC issued Brief 66/08 announcing a change of view that non-communal areas would be regarded as dwellings, subject to a consultation period where interested parties could express their view.
The following example is set out in R&C Brief 66/08:
A student accommodation block has three floors, each with ten en-suite 'study bedrooms' that are individually lockable. Each floor also has a kitchen and TV room, which are for the use of the ten occupants. The building has air-conditioning equipment located in the attic and a boiler located in the basement - only maintenance personnel have access to these areas.
In this example the kitchen and TV room are communal areas and not dwelling houses. The stairs and corridors which give access to other areas are also communal and are not dwelling houses. Tenants do not have access to the roof and attic and so they are not dwelling houses. The individual study bedrooms, however, are dwelling houses.
The intention was to update their guidance accordingly, but this has yet to happen due to the representations made. This means that the current guidance still applies and HMRC have given an assurance that any subsequent changes will not be backdated to expenditure already incurred. Up to 100% capital allowances are available on plant & equipment and unrestricted claims should presently be made on the basis that the whole house is not a dwelling. Often overlooked, is the ability to claim capital allowances on the existing fixtures & fittings included when purchasing a property. In order to maximise such claims, it is advisable to involve a Chartered Surveyor. It is also possible to make a claim (or an enhanced claim) for the previous year.
If you are looking to invest or have already invested in HMOs, please contact our Tax Director, Daren Peacock on 01270 623731 or email daren.peacock@affordbond.com for further information.
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