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Tax treatment of HMO

house in multiple occupation (HMO)

Hi, 

One of my clients has got one property which consists of 7 flats under HMO. When filing his tax return on property pages of tax return, shall I state it as one property or 7. If answer is one property then how about if the clients wishes to sell one of these flats in the future? or is it that you can't sell some of the flats under HMO and you can only sell as one property? Any help is most appreciated.   

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14th Sep 2018 14:03

How can it be an HMO if it consists of 7 self-contained flats?

EDIT: "is it that you can't sell some of the flats under HMO and you can only sell as one property? "

That is a legal question.

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By Humble
to Accountant A
14th Sep 2018 15:13

Thanks for your comments. As I said its one big property but has got 7 flats. There one kitchen to share etc hence it comes under HMO. My question was on property pages of SATR, would it go as one property or 7?

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to Humble
14th Sep 2018 15:22

So how's he going to sell on of the flats individually? Is it one property or seven?

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By Humble
to Portia Nina Levin
14th Sep 2018 17:43

Can't say but I suspect as one.

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to Humble
14th Sep 2018 18:27

Humble wrote:

Thanks for your comments. As I said its one big property but has got 7 flats. There one kitchen to share etc hence it comes under HMO. My question was on property pages of SATR, would it go as one property or 7?

Your questions were:

"If answer is one property then how about if the clients wishes to sell one of these flats in the future?"

"... is it that you can't sell some of the flats under HMO and you can only sell as one property?"

As others have pointed out "... 7 flats. There one kitchen to share etc ..." doesn't meet any usual definition of "7 flats". You will struggle to sell a "flat" with no kitchen.

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By puzzel
14th Sep 2018 16:32

How many council tax bills are allocated to the property?

In general, for an HMO there is only 1. they are classed as rooms and not as a flat.

The property has shared cooking facilities.

I think it would be hard to sell an individual room.

It is 1 property

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By Humble
to puzzel
14th Sep 2018 17:43

This makes sense and I appreciate your helpful comments. To the point.

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14th Sep 2018 16:34

I suspect what your client has is an HMO for which their are separate rental agreements/leases with each occupant, rather than a single agreement where the tenants divide the rent between them.

I can't see that it makes any difference how you report the income on the SA return, but I would report it as an aggregate figure.

As far as CGT is concerned as already pointed out in earlier posts it seems improbable that any of the "flats" could be sold separately, but if they could then the calculation wouldn't be affected by how you reported the rental income for income tax.

BTW there must be other common areas in the property aside from the kitchen - how do tenants get between their accommodation and the kitchen?

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By Humble
to tonycourt
14th Sep 2018 17:48

Many thanks for your input. I was also inclined to put it as one property. However I never came across with such situation hence picked your brain.
Anyhow facilities such as kitchen, bathroom etc are shared. Rates bill is one for the whole property. I think I can now comfortably put it as one property :-)

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By puzzel
14th Sep 2018 20:37

Just as a backup on what I have posted.
I do have a landlord client with many properties.
So for fact, he owns several old Georgian mid terrace houses.
Rooms 1 to 6 are classed as an HMO, however the attic (flat 7) is converted to a flat (self contained).
This gives two council tax bills, one for the HMO element and one for flat 7 as it is self contained.
With our local council, if the room has its own ablutions, then it is a flat and not part of an HMO even though the kitchen, tv lounge and corridors are shared .
You need to understand what your local council determines what an HMO is.
In my case, the client may be able to sell flat 7 on its own, but not any of the individual rooms of 1 to 6.
If flat 7 were sold then I would assume it was sold on a leasehold basis.
So to answer your question from what you have provided, it is one property.
In any case I would not put the exact amount of properties, just to stuff up their stats 

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