Air BNB landlords across the UK are being warned by the tax authorities that they could face bills worth thousands of pounds in back taxes and fines if they fail to declare income from renting part of their homes.
An investigation has been launched by Her Majesty’s Revenue & Customs (HMRC), after receiving income details last week from Airbnb’s 225,000 UK hosts from their short-term letting, following the striking of a deal on unpaid tax of its own.
Back in late 2015, we were forewarned that HMRC were planning to force on-line companies like Airbnb to share customer income data with them. That plan has come to fruition & HMRC is now receiving detailed information from Airbnb and other online providers. The data will tell HMRC about lettings income that may have been previously falling under their radar.
Airbnb is an online marketplace where people can rent out rooms, cottages, apartments etc. to those looking for short-term accommodation, city breaks, holidays or lower cost alternatives to hotels and overnight business stays.
If you let a property or a room on Airbnb, you can expect detailed information to be passed onto HMRC about your letting activities and the income it generates. While you may currently be able to earn up to £7,500* per year tax-free for furnished accommodation under the Government’s ‘Rent a Room Scheme ‘, landlords must submit a tax return form and pay tax on any income received once you have gone over that limit. This limit might also take an individual to a higher rate tax bracket which must be taken into consideration while tax planning.
To qualify under the Rent a Room Scheme the following conditions must be met:
> The room must be furnished.
> The relief cannot be used if you let your home whilst living abroad.
> The accommodation provided cannot be office space or business space.
Also, from 6th April 2019 HMRC decided after consulting with relevant professionals and the public, that landlords who do not live in their “main residence” at the same time as their tenants will probably no longer be able to claim, “rent a room relief”.
The Airbnb data will allow HMRC to launch targeted enquiries into the tax affairs of individuals who have not declared their lettings income for 2017/18 and 2018/19. The deadline for opening an enquiry into a self-assessment return for 2018/19 is 31 January 2021, if the return was issued and submitted on time. However, the discovery rules allow HMRC to go back much further, up to 20 years in some cases. The data provided by Airbnb will certainly constitute a discovery for HMRC’s purposes, so up to 20 years it will be open for enquiry.
HMRC is reported as saying it will address any issues over the landlords’ payment of tax in 2021/22. This clearly indicates that HMRC expects to use its discovery powers to open tax enquiries going back some years.
We as a firm have huge expertise in this sector. We have helped many landlords to declare their income and got them up to date with HMRC. Recently we assisted many clients with their let property campaign. We will assist you with the whole process including communicating with HMRC & calculating your tax affairs for the previous years.
Our experienced experts will also ensure to claim all the allowable expenses, for per HMRC guidelines to minimise your tax liability as much as possible. We can also help you achieve the minimum penalty rate, guide you through the maze of rules and regulations concerning lettings, renting out accommodation, tax thresholds, knowing when it’s appropriate to work under the Rent a Room Scheme & whether you can claim expenses. We have a huge success rate in this sector, hence the reason we are confident that we can bring your affair up to date with HMRC.
Written by Kazi Ashraf