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Capital Allowances are not typically available on residential property.

Plant and Machinery Allowances (PMA) are not available on a dwelling used in a property business (CAA2001 s35), but this does not prevent PMA being claimed on two different classes of residential property investment.

Firstly, HMRC’s definition of a dwelling does not include the common parts of a residential building. It is accepted practice to claim PMA in the common corridors, lobby, basement car parks etc of a block of flats or most student halls.  For example, this could include the lift installations, lighting, heating and security systems to these areas.

Therefore the level of PMA will vary depending on the extent of the common areas and the level of actual services installed in those areas.  A typical PMA claim may range from 5% to 15% of the capital expenditure.

This does not extend to Houses in Multiple Occupancy, where HMRC consider that the entire property does not qualify for PMA.  They consider the hallways, stairs, landings etc are part of the “dwelling-house” providing the “facilities required for day-to-day private domestic existence”.  This view was supported in the 2019 First Tier Tribunal case HMRC v Hora Tevfik [TC07383].

Secondly, you can claim PMA within a qualifying Furnished Holiday Letting (FHL). [Please note the FHL regime will be abolished from April 2025]. What qualifies as an FHL is well defined but includes properties both in the UK and the European Economic Area (EEA).  It is important to remember that any allowances can only be used in the separate UK or EEA FHL trade and cannot be claimed in a wider ordinary property business.

It is common to acquire an FHL from a private householder who lived in the property.  This means that the vendor was not entitled to claim PMA and a full, unrestricted CAA2001 s562 apportionment of the price paid may be possible. 

Importantly Structures and Buildings Allowances (SBA) does not apply to any residential property, including the common parts of a residential block, or an FHL.