Flow characteristics of a non-adiabatic capillary tube in a transcritical CO2 heat pump cycle have been investigated employing homogeneous flow model. The model is based on fundamental equations of mass, energy and momentum which are solved simultaneously through an iterative process. Chosen empirical correlations are used for calculating viscosity and friction factor. Single and two phase heat transfer coefficients are estimated through appropriate empirical correlations. Sub-critical and super-critical thermodynamic and transport properties of CO, are calculated employing precision property subroutines. Three different cases are considered to optimise location of the heat exchange process: only single phase flow region, only two phase flow region. and both single and two phase flow regions. Heat transfer is more prominent in single phase region due to larger temperature difference between suction line fluid and capillary tube fluid. Relatively superior performance is obtained when the heat exchanger is placed in the single phase region. Chances of condensation are lower as refrigerant quality is relatively higher at the time of inception of vaporisation. Design and simulation are employed to investigate the refrigerant flow behaviour inside the non-adiabatic capillary tube. (c) 2007 Elsevier Ltd. All rights reserved.