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HMRC have updated their interpretation of the term ‘dwelling-house’ to include communal areas of student accommodation.
The change means fixtures and fittings for shared spaces such as kitchens and TV rooms will no longer qualify for capital allowances.
It follows Revenue & Customs Brief (RCB) 68/10, issued in December 2008, which sought comments on some of the proposed revisions to guidance in the department’s Capital Allowances Manual, including an amendment of the meaning of ‘dwelling-house’ for the purposes of section 35 of the Capital Allowances Act (CAA) 2001.
Tax practitioners ‘expressed reservations’ about RCB 66/08, said the Revenue, which as a consequence invited further input and discussion on the matter. In 2009, the department clarified that taxpayers should continue to file returns based on the existing published guidance.
HMRC now consider that the meaning of 'dwelling-house' for part 10 of CAA 2001 (Assured Tenancy Allowances) is the same as that contained in the Housing Act 1980 and is specific to the part, while other parts of CAA 2001 take the term’s ordinary, everyday meaning.
The revision, set out in RCB 45/10, is intended to reflect the nature of contemporary university accommodation, with students often living ‘cluster flats or houses in multiple occupation’, according to the taxman.
Halls of residence regularly consist of single, lockable flats with en-suite bathroom facilities, while ‘the kitchen/dining room and lounge/TV room for each flat might typically comprise communal areas’ and will therefore be considered to be dwelling-houses. The status of common areas such as stairwells and hallways will not be affected.
The updated view, as expressed in the revised guidance, will apply in all circumstances in relation to capital expenditure incurred on or after 22 October 2010.
In relation to capital expenditure incurred on or after 29 December 2008 but before 22 October 2010, HMRC will accept capital allowances claims in returns either made in respect of communal areas on the basis of the view as set out in RCB 66/08 or on the basis of the view as previously set out in CA11520 and CA23060.
With regards to capital expenditure incurred before 29 December 2008, claims made in returns for open years and filed before 22 October 2010 relying on RCB 66/08 will be accepted.
