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  • HMO & Multi-Lets

    Capital Allowances

    Can anyone advise what is HMRC’s current thinking on capital allowances for the following type of HMO? All bedrooms have their own ensuite. They also have a kitchenette which comprises a fridge freezer under a worktop and a wall unit above the worktop. There is also a double socket above the worktop which can be used to power a kettle, toaster or microwave etc.

    There is communal all singing all dancing large kitchen diner. The communal cellar incorporates the boiler and a hot water storage cylinder. It is also used to store tenants bikes etc. There is also a communal entrance hall and landing.

    Do all these communal areas qualify for capital allowances?
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    Our current understanding is capital allowances can't be claimed on HMOs...it was possible a few years ago as a bit of a grey area but advice from practioners changed advising not to do so now. If you have a property specialist accountant they should be up to speed on things. Capital allowances can be claimed on the communal areas of blocks of flats...I guess if you owned a block of flats that you had turned into multiple HMOs you would be able to claim on the block communal areas, but not the communal areas within each HMO. Definitely something to get specialist accountant advice on.

    Best,

    Guy

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    Guy Brown
    Blue Infinity Property Group
    M 07791-661491 | T 0118 3360366 | E guy@blueinfinityproperty.com<script data-cfhash='f9e31' type="text/javascript">/* http://www.blueinfinityproperty.com

    * New build residential developments and flat conversions in the Home Counties
    * High end HMOs in Reading and Bracknell

    Thanks Guy,

    I’m trying to find out myself as my experience is that if you speak to 3 accountants you’ll get 3 different answers. Ultimately I’m finding that there are a lot of grey areas and decisions need to be made depending on what risk profile different landlords have.  

    My understanding is that if a room can be classed as it’s own dwelling then there is a case to be made for capital allowances in communal areas. I feel my rooms are a borderline case for being classed as separate dwellings and was wondering if HMRC would class my rooms this way. I have kitchenettes but would HMRC concede this ticks the kitchen box? If they did then my risk profile would be happy with claiming capital allowances in communal areas and I’d take my chances.
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    The LHA criteria would probably help to clarify - the SAR rate would be the applicable rate as the occupant shares other facilities.

    The 1 bed rate would apply only to a self contained rental 

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    I don't have any answers, just a tangential thought....

    Is there any correlation between HMRC's definition of a dwelling and the VOA's definition of a liveable unit? If an HMO qualifies for ICTB does that imply it qualifies for CA or vice versa?

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    A good teacher must know the rules; a good pupil, the exceptions.

    Martin H. Fischer


    Logic would tell me that if ICTB was applied then CA should be claimable. My HMO is in area where we currently don’t have ICTB problems on our rooms but I know this is not the case in other parts of the country.

    On balance I think it could be realistically argued that communal areas in HMOs such as mine should qualify for CA. As is typical with HMRC they don’t give a definitive answer. I’m going to go for it and instruct my accountant accordingly as I suspect he would just want to play it totally safe and not claim.
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    One further thought, and it may depend on which area you are in, but if your rooms are classed as self-contained you may be exposed to paying separate Council Tax on each unit. That has hit some HMO operators in some areas very hard, particularly if they have a void.

    Best,

    Guy
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    Guy Brown
    Blue Infinity Property Group
    M 07791-661491 | T 0118 3360366 | E guy@blueinfinityproperty.com<script data-cfhash='f9e31' type="text/javascript">/* http://www.blueinfinityproperty.com

    * New build residential developments and flat conversions in the Home Counties
    * High end HMOs in Reading and Bracknell