Clampdown on tax for university digs

As efforts continue to maximise tax revenues, fixtures and fittings bought
for university digs will not qualify for tax breaks.

Under the new amendments, costs of communal area equipment in flats- such as
kitchens or lounges – would be ineligible for offseting against a company’s
taxable profits, a break currently allowed under the capital allowances regime.

However the taxman stopped short of withdrawing the capital allowances for
en-suite facilities of individual student rooms.

The move brings the reliefs available for student digs into line with those
applying to flats or houses shared by friends or key workers, the taxman said.

“The fact that it may be occupied by students is, in a sense, incidental,”
HMRC said.

The taxman is pushing for the revision because student accommodation has
evolved over the years since capital allowances legislation was first drawn up.

Back in 2008 the taxman released asked for comments on the proposals and has
now pushed these through.

HMRC said the changes, proposed in R&C Brief 66/08, had to reflect
students and other tenants often lived in buildings with several floors, and
each of these floors had separate flats with communal kitchens and living areas.

University residences like these are currently not classed as “dwelling

However, the changes will see the accomodation reclassified as “dwelling
houses” making them ineligible for the tax breaks.

Only university accommodation where students did not have dedicated communal
areas for each flat would escape the clampdown.

The equipment purchased for the entire building would have qualified for the
capital allowances previously but HMRC has tweaked the rules.

“HMRC has concluded that the better view is that each flat in multiple
occupation comprises a dwelling-house, given that the individual study bedrooms
alone would not afford the occupants ‘the facilities required for day-to-day
private domestic existence’ “.

The common parts of the building block such as the common entrance lobby,
stairs or lifts would not be classed as part of the dwelling-house HMRC added.

The new rules will apply to all capital expenditure incurred on or after 22
October 2010, the taxman warned.

“In relation to capital expenditure incurred on or after 29 December 2008 but
before 22 October 2010, HMRC will either accept capital allowances claims in
returns made in respect of communal areas on the basis of the view as set out in
R&C Brief 66/08 or on the basis of the view as previously set out in CA11520
and CA23060.”

“In relation to capital expenditure incurred before 29 December 2008 claims
made in returns for open years and filed before 22 October 2010 relying on R
&C Brief 66/08 will also be accepted.”

Further reading:

your claims still qualify?

Related reading