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Can anyone shed any light on whether a HMO which has been previously converted from a residential property would be considered to be a commercial property or a residential property? It seems to me that the tax treatment of mortgage interest relief for those who run a HMO on an individual basis and not under a corporate structure appears to be a gray area. According to the HMRC Property Income Manual the mortgage interest restrictions do not apply to commerical properties. Given that HMO’s are valued as a commercial property and any mortgage secured against its purchase is a business mortgage and not a standard BTL mortgage, it seems that it is possible MI suffered in the servicing of a loan for a HMO should be fully deductible and thereby not subject to the restriction on MIR. Also, the HMRC PIM specifically excludes furnished holiday lets. Is it the case that a HMO premises is therefore a hybrid of a dwelling house and what might be considered a commercial property? I accept that there are material differences between a commercial property and a HMO in that a commercial property is likely to be let under a long lease agreement, and a HMO is let on a set of individual AST’s which are short term in nature.
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