Landlords can’t claim capital allowances on the cost of items used within residential properties (referred to as dwelling houses in CA 2001, s 35). However, there can be confusion over whether the cost of items in communal areas of blocks of flats or student residences, qualify for capital allowances.
Certain specialist firms will approach landlords of houses in multiple occupation (HMOs) encouraging them to claim allowances on up to 8% of the price paid for such properties. These claims are almost certain to fail when examined by HMRC, as illustrated by the case of Hora Tevfik (TC07383).
Tevfik let out three HMOs in Wokingham and Reading for which he claimed £50,000 of allowances under the AIA for 2011/12. This was the first mistake as the AIA only applies for items purchased on or after 6 April 2008. Tevfik was claiming allowances for equipment included in the properties which purchased before April 2008.
Tevfik’s agent; Portal Tax Claims, apparently surveyed the properties and made claims for equipment included in communal areas. However, the HMRC capital allowances manual at para CA11520 makes it clear that “the facilities required for day-to-day private domestic existence” (eg kitchens and bathrooms), are considered part of the dwelling house and don’t qualify for capital allowances.
The survey of the properties was not made available to the FTT, if it had been there may have been scope for accepting capital allowance claims relating to items in genuine communal areas such as on the stairways and corridors.