HMO Capital Allowances

If you own a Home of Multiple Occupation (HMO), you may be able to benefit from significant tax relief in the form of Capital Allowances equivalent to the costs of “Plant and Machinery” within certain parts of the property. It’s worth pointing out that Plant and Machinery is a broad term and is not necessarily limited to electrical or mechanical items within the property.

HMRC often revises and updates their guidance as to which areas of certain properties qualify for capital allowances. Currently the legislation includes the “common parts” of the property, which is taken to mean all parts which are considered non-dwelling living space. Therefore, areas such as hallways, entrances, garages, basements and the like will be considered as qualifying areas for tax purposes, and so the items of Plant and Machinery within these areas will most likely qualify for Plant & Machinery Capital Allowances relief.

Once your instruction has been accepted we will undertake a survey of the property in order to identify and value the plant and machinery within the qualifying areas of the building. We will then provide a detailed report which can be submitted to HMRC to back up your claim. The survey will be undertaken by an experienced Chartered Surveyor with specialist knowledge within this field.

This very much depends on the property in question, but typically you could expect to save in the region of between 5% to 20% of the purchase price or valuation. As you can see, there is potential for significant tax savings!

In this example, the subject property was purchased between 29th Dec 2008 and 21st Oct 2010 for £200,000 and has several lettable rooms with a communal lounge, kitchen, hallway and laundry room in the basement. We would calculate the value of Plant and Machinery within these “communal areas” to be in the region of £40,000  meaning that you could save this amount on your tax bill against your income stream.