Capital allowances – dwelling-house
HMRC has published new guidance on the meaning of a ‘dwelling-house’ for the purposes of the Capital Allowances Act 2001. This primarily affects accommodation where multiple users share facilities such as blocks of flats and student halls of residence.
HMRC originally took the view that student halls of residence were not dwelling houses. However, the term “dwelling house” is ambiguous and following a 2001 case HMRC has, some years later, now revised its view. HMRC will now treat each flat or room in a house that is in multiple occupation as a dwelling-house. And where an individual bedroom does not provide its occupant with the facilities required for day-to-day private domestic existence then shared parts including the communal kitchen and lounge are also to be treated as part of the dwelling-house.
The consequence of this change is that capital items ("plant and machinery") provided for use in a ‘dwelling house’ do not qualify for capital allowances.
This updated view will apply for capital expenditure incurred on or after 22 October 2010. HMRC have also confirmed that businesses can opt to use the new definition for the period from on or after 29 December 2008 but before 22 October 2010 if they so wish. Claims in relation to capital expenditure incurred before 29 December 2008 made in returns for open years and filed before 22 October 2010 will also be accepted.