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Capital allowances on a buy to let? Surely not!

10th Nov 2010
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Prompted by a question on Any Answers, Rebecca Benneyworth presents a summary of what some are claiming is a 'new' availability of allowances in relation to let property.

Section 35 of the Capital Allowances Act 2001 forbids capital allowance claims in respect of plant and machinery in a "dwelling house". This is the rule that is disapplied in relation to furnished holiday lettings, permitting potentially significant capital allowance claims.

But for normal lettings, no capital allowances can be claimed in respect of any of the plant and machinery inside the house.

During the modernisation of the capital allowances legislation in Finance Act 2008, HMRC released new guidance on capital allowances for the capital allowances manual, and it was during this process that a new definition of "dwelling house" was arrived at and published as Revenue & Customs Brief 66/08 in December 2008.

The new definition specifically referred to student houses. It has long been accepted that traditional halls of residence are not dwelling houses, but often modern student accommodation is formed of "flatlets" where students living in private study bedrooms with en suite bathrooms share a kitchen/dining room and lounge with other occupants.

HMRC's view in 2008 was that each study bedroom was a dwelling house, so the communal kitchen and lounge area would not be a "dwelling house" so capital allowance claims could be in respect of plant and equipment in those areas. For kitchen equipment in particular, expenditure attracting allowances could be quite significant.

On 22 October this year, HMRC revised its interpretation of "dwelling house" in Revenue & Customs Brief 45/10. Perhaps realising that it may have been overgenerous on the allowances granted, the department acted on further legal advice that viewed each "flatlet" as a dwelling house, as the individual study bedrooms do not provide "the facilities required for day-to-day domestic existence".

As a result of this interpretation, claims would be limited to expenditure on plant and equipment in the communal areas of the building in which several "flatlets" were situated – such as hallways and stairs. This significantly affects the availability of claims in student houses which have been specifically adapted as multi-occupancy dwellings with en suite facilities.

Note that ordinary houses adapted for student tenants will not normally have en suite facilities, and therefore would not have benefitted from the interpretation in Brief 66/08, and in no way does the Brief relate to normal houses or flats let to a single or family occupant.


  • Expenditure prior to 29 December 2008 could be claimed in accordance with the interpretation in Brief 66/08 provided the return was submitted before 22 October 2010 so claims of this nature are no longer possible.
  • Expenditure between 29 December 2008 and 22 October 2010 can attract capital allowances in accordance with Brief 66/08.
  • Expenditure on or after 22 October 2010 can only be claimed in accordance with the new restricted interpretation in Brief 45/10. member Paul Scholes raised the issue in an Any Answers question on 23 September, followed by 'Bubbleblower' on 22 October, who reported reading an inflight magazine article suggesting that capital allowances of up to 20% could be claimed on the purchase price of buy to let property.

'Lauren69' who blogs at www.propertytax scotched that overenthusiastic wheeze by pointing to the new HMRC brief that tightened the multi-occupancy definition.

There were some specific instances where the 2008-10 interpretation did allow some generous claims, but this is just another example of a ridiculous overestimate from the bulk claims merchants. Most accountants will consider the possibilities available from the 1,000 or so reliefs and allowances within our overcomplicated tax system, and they will know a "sounds too good to be true" claim when they see one.

Replies (2)

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By Paul Scholes
15th Nov 2010 12:37

Thanks Rebecca

Funny my client's first words when sending me the magazine article were "I think this sounds too good to be true"

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By jannereeves
06th Nov 2012 09:28

Nice Share

Last month i renovated my home by installing some ready to assemble cabinets just to increase the value of my home.

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