4 Owners of Student Properties
Capital Allowances are not usually given on residential property or as they are termed in the statute “dwelling houses”. Bespoke student accommodation is not, however, caught by this exclusion and there is the potential to claim plant and machinery allowances on items such as kitchens, bathroom fittings, heating and electrical installations etc.
Until December 2008, the guidance given by HMRC was as set out below:
CAA01/S531
There are several references to dwelling house in CAA2001. The term appears in Part 2 (plant and machinery allowances), Part 3 (industrial buildings allowance) and Part 10 (assured tenancy allowances). There are also references to dwelling in Parts 3 and 6 (research and development allowances).
For Part 10 (ATA) dwelling house is given the same meaning as in the Rent Act 1977 (CAA01/S531). It is not defined for other Parts but is read in the same way.
A dwelling house is a building, or part of a building, which is a person’s home. A person’s second or holiday home is a dwelling house as is a flat that is used as a residence. A block of flats is not a dwelling house although the individual flats within the block may be. University halls of residence, accommodation used for holiday letting, a hospital, a nursing home or a prison are not dwelling houses.
The eligibility of Student Accommodation was thrown into some confusion in December 2008, however, Revenue & Customs Brief 66/08 was issued. This gives a much narrower definition as can be seen from the following:
“We consider that communal areas are not dwelling houses. Areas to which tenants do not have access are also not dwelling houses. However, all other areas are dwelling houses”.
HMRC have now accepted that this narrower definition will not apply to those investors who bought properties before 29 December 2008.
This means that Investors will now be able to claim capital allowances based on the purchase price of the property. Typically a claim will be 10% to 25% of the price paid. The exact amount will, however, need to be calculated on a “just apportionment” basis in accordance with CAA 2001, section 562.
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