Student accommodation units in a building were ‘qualifying premises’ as defined in section 46 Finance Act 1986

J Twomey (Inspector of Taxes) v B.H. [2007 491R]

The High Court (Laffoy J) has upheld a Circuit Court Judge determination that student accommodation units in a building were ‘qualifying premises’ as defined in section 42 Finance Act 1986, i.e. that the they constituted a building in use for the purposes of a trade and they were not in use as a dwelling-house.

The taxpayer, a member of a partnership, claimed relief for 1994/95 for his share of partnership losses, as augmented by capital allowances in respect of apartment units owned by the partnership. The core issue was whether or not the units were in use for the purpose of a trade.

The units consisted of one, two and three bedroom units on the upper floors of an apartment block. The partnership rented a ground floor premises out of which it operated a shop/café, a launderette and an office/reception. The units were advertised in various guides and newspapers and the premises were registered with Bord Failte as self-catering accommodation. Tourists were provided with linen, towels, television and a telephone connected to reception. Reception provided wake-up calls, secretarial services, tourist information and other services, including cleaning.

In the period October to May the partnership provided accommodation primarily to students sometimes on a shared room basis.

Revenue’s argument that the income from the units was assessable under Case V of Schedule D was rejected. Laffoy J felt that the reference to ‘any payment in the nature of a rent’ was to a payment by a lessee or tenant to a lessor or landlord in the context of a landlord and tenant relationship.

The Circuit Court Judge was correct in concluding that the payments received by the partnership from users of the units were not assessable under Case V but was entitled on the facts to hold that the Partnership was using the units for the purposes of the trade of providing accommodation for users such as tourists, businessmen or students. An application of the ‘badges of trade’ to the partnership’s activities supported such a determination.

The second issue to be dealt with was whether or not the units were in use as a dwelling house. Revenue argued that the units were in use as dwellings and within the ambit of ‘section 23’ relief rather than the capital allowances regime. However, the term ‘dwelling’ was not considered a term of art and a member of the public would not regard the units as a block as forming a building in use as part of a dwelling. The meaning of a dwelling fell to be determined in the context of the statutory scheme of capital allowances for buildings.

The Circuit Court Judge determination that units were ‘qualifying premises’ in use for the purpose of a trade, but not as a dwelling house, was correct.