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Do I need to register VAT/how best to report finan

Do I need to register VAT/how best to report finances etc

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I have received rental income from 3 properties and a footwear business. I am registered as self employed but honestly I haven't a clue what I'm doing. My questions are at the end:

Property 1

A 3 bedroom property, I have resided in one room in the property for 275 days.
The other rooms/the rest of the days in my room I have been sub renting out to both short and long term Airbnb guests whilst I pay the bills, costs and rent for the full property to the landlord.
I received £39,263.23 in Airbnb rent
Total costs for the property £25,115.82 (of which £22,100.04 were my rent costs)

Property 2

I assisted a Chinese national with the sub renting on my Airbnb account of her whole studio flat for 90 days on Airbnb to both short and long term Airbnb guests and paid her 50% of any profits. 

I received £32,036.82 in Airbnb rent
Total costs for the property £24,353.91 (of which £23,400.00 were my rent costs)
50% of the profit was transferred to her.

Property 3

I assisted a different Chinese national with the sub renting on my Airbnb account and her Airbnb account of 2 of the 3 rooms in the 3 bed flat that she resides on Airbnb.
We received £24,530.76 in Airbnb rent. £20,032.43 of that was received on her Airbnb account and she transferred me £9835.86 the rest is to me.

Total costs for the property £25,368.56 (of which £22,574.14 were my rent costs)

Footwear 

£1,885.09 in sales (UK, EU and international)
£1,346.01 in expenses (UK, EU and International suppliers)

I have not been charging VAT on any of these. I have been charged VAT on all expenses other than rents.

-Do I need to register for VAT? I understand the threshold is £85,000 but I don't know if these can be classes as seperate businesses or if I do indeed exceed this figure anyway. I do not expect to reach this figure again. 
-Would I be better off if I registered anyway?
-How much VAT do I need to pay/can claim?
-If I can offset this year's personal profits against 2 losses incurred in 2017 and 2018 to fall below the £11,500 allowance will this change things?
-Would there be a better/more tax efficient way for me to organise these things?

Replies (45)

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By Payrollgal
21st Sep 2019 15:17

You need an accountant or tax advisor. Your post is asking too much and people don't spend years training to give it all away for free :)

Of course I can recommend someone or you can hit google.

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Replying to Payrollgal:
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By lukeylukeluke
21st Sep 2019 15:44

I'm based in London, who might you be able to recommend?

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Replying to lukeylukeluke:
RLI
By lionofludesch
21st Sep 2019 16:04

I'm not particularly familiar with Laaaaaaaaandon but I understand it's a big place.

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Replying to lionofludesch:
By Red Leader
22nd Sep 2019 09:53

Huge.

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By zarar
21st Sep 2019 15:41

You need to appoint an accountant and get them to help you with this

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chips_at_mattersey
By Les Howard
21st Sep 2019 19:14

VAT legislation looks at the ‘person,’ not the ‘business.’ So you cannot treat your properties as separate businesses for VAT purposes.
Ideally of course you should have sought advice when you started. Urgently book an appointment with an Accountant or VAT specialist. You should be prepared to invest some money in getting good advice.

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Replying to leshoward:
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By lukeylukeluke
21st Sep 2019 19:33

Thank you for your reply. I have ended up doing this property stuff to help out friends and as such I was not expecting there to be big implications. As yet, I have not been able to find an affordable accountant however I am happy to receive suggestions of affordable ones/alternatives. Perhaps you would be ok to clarify this for me in the meantime?:

I helped a couple of friends manage their property on Airbnb.

The Airbnb money went into my account, the costs came out of my account and I transferred to them 50% of the profit (keeping the other 50% for myself).

The total money into my account exceeded £85,000

My question is, is this +£85,000 contributing to my turnover limit for VAT or theirs?

If it's theirs then how do I figure out what my turnover was.
If it is mine then, is that what all 'property managers' face when dealing with their client's money: their client's funds in and out contribute to their turnover and they could end up having to register for VAT?

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Replying to lukeylukeluke:
By Tim Vane
21st Sep 2019 20:31

LOL. You can’t find an affordable accountant??! All that money washing around and the potential for a sizeable tax bill. Mate, I think you can’t afford not to have an accountant. If it suits you to save money by paying extra tax then go for it.

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Replying to Tim Vane:
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By Accountant A
22nd Sep 2019 13:16

Tim Vane wrote:

LOL. You can’t find an affordable accountant??!

Another one who completely disrespects the very profession whose advice he badly needs.

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Replying to Accountant A:
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By lukeylukeluke
22nd Sep 2019 14:41

This website allows me to ask questions, I'm asking questions. If you choose to feel disrespected, that's your problem, not mine.

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Replying to lukeylukeluke:
RLI
By lionofludesch
22nd Sep 2019 15:23

lukeylukeluke wrote:

This website allows me to ask questions, I'm asking questions. If you choose to feel disrespected, that's your problem, not mine.

Well, actually, it's a website for professionals - not for wealthy freeloaders.

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Replying to lukeylukeluke:
By Red Leader
22nd Sep 2019 09:54

You need to revisit your definition of "affordable".

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By lesley.barnes
22nd Sep 2019 09:40

I think you have other problems above accounting matters with this set up. Does the landlords know you are sub letting their property? Are they insured as holiday lets and are they registered with the local authority? Are you happy that allowing aquantiences to use your bank account and Airbnb account isn't helping someone in money laundering? You need to pay for some good advice preferably to an accountant who is familiar with this these matters.

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Replying to lesley.barnes:
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By lukeylukeluke
22nd Sep 2019 11:52

I’m certain registration is not required for anything less than 90 days in London. Also there’s no ‘crime’ for which proceeds are being ‘laundered’

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Replying to lukeylukeluke:
RLI
By lionofludesch
22nd Sep 2019 15:22

lukeylukeluke wrote:
Also there’s no ‘crime’ for which proceeds are being ‘laundered’

How do you know your friends aren't committing crimes ?

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Replying to lionofludesch:
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By lukeylukeluke
22nd Sep 2019 15:39

A bit of a peculiar angle, I don't really understand the relevance. The same way you know/don't know if your clients are committing crimes... I think I've exhausted the utility of pursuing this thread. Thank you for your responses, I will direct my questions elsewhere.

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Replying to lukeylukeluke:
RLI
By lionofludesch
22nd Sep 2019 15:56

lukeylukeluke wrote:

A bit of a peculiar angle, I don't really understand the relevance. The same way you know/don't know if your clients are committing crimes...


We make enquiries. What enquiries have you made ?
Quote:
I will direct my questions elsewhere.

Great news. Thank you.

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By lukeylukeluke
22nd Sep 2019 11:35

I’m quite sure it should be something as simple as treating this as me being a property manager and invoicing her my ‘fee’. Surely monies that go through someone’s account on behalf of their client should not constitute turnover. How do estate agents etc do it?

For the people suggesting I should hire an accountant. I found litrg.org.uk and will try them. Thank you for your replies.

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Replying to lukeylukeluke:
RLI
By lionofludesch
22nd Sep 2019 18:00

lukeylukeluke wrote:
I found litrg.org.uk and will try them.

[chuckle]

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Replying to lionofludesch:
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By lukeylukeluke
22nd Sep 2019 18:20

Something the matter?

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Replying to lukeylukeluke:
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By atleastisoundknowledgable...
22nd Sep 2019 18:45

lukeylukeluke wrote:

Something the matter?

Come back in a few months and let us know.

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Replying to lionofludesch:
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By lukeylukeluke
22nd Sep 2019 18:20

Something the matter?

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Replying to lionofludesch:
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By lukeylukeluke
22nd Sep 2019 18:20

Something the matter?

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Replying to lukeylukeluke:
RLI
By lionofludesch
22nd Sep 2019 18:22

Hopefully, we'll never know.

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Replying to lionofludesch:
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By lukeylukeluke
22nd Sep 2019 18:37

Sorry, I don’t get what you’re on about. Was the meaning behind your comment something that would be in the spirit of holding your profession in a positive light?

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Replying to lukeylukeluke:
RLI
By lionofludesch
22nd Sep 2019 18:53

lukeylukeluke wrote:

Sorry, I don’t get what you’re on about. Was the meaning behind your comment something that would be in the spirit of holding your profession in a positive light?

Mate - you're not "low income". Just accept it.

Do as you've been advised and go and get an accountant.

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Replying to lukeylukeluke:
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By paul.benny
23rd Sep 2019 08:41

lukeylukeluke wrote:
Surely monies that go through someone’s account on behalf of their client should not constitute turnover. How do estate agents etc do it?

They have 'client accounts' to segregate client monies from their own. All regulated professionals (accountants, lawyers, estate agents, etc) are required to do so - and anyone else regularly handing client money should do so.

You've mentioned trying the Low Income Tax Reform Group. If you check their website, you will see that they do not provide tax advice.

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By Wanderer
22nd Sep 2019 16:22

Lukey, you've not only got VAT issues and Income Tax issues. You've possibly got responsibilities (i.e. further tax issues) under the non resident landlord's scheme which hasn't yet been mentioned.

Seriously you need to take the advice already given to urgently book an appointment with an Accountant.

Doubt this is something that litrg would get involved with.

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Replying to Wanderer:
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By lukeylukeluke
22nd Sep 2019 18:44

Well they are uk resident. As for the rest, it doesn’t really look like I’m going to get much help here despite me thinking this was a site for asking accountancy-related questions. Which is fine, it would be nice if many responders to this thread were a little more professional whether they are being paid or not as it really doesn’t give me good opinion of them. It feel like a teenage boys forum in here.

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Replying to lukeylukeluke:
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By lionofludesch
22nd Sep 2019 18:56

Nobody can give you reliable advice without a proper fact finding interview to establish your circumstances.

In fairness, you're not the first layman to come on here and expect his problems to be resolved in a couple of sentences.

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Replying to lukeylukeluke:
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By paul.benny
23rd Sep 2019 08:51

lukeylukeluke wrote:
Well they are uk resident.

'Resident' has a particular meaning in tax world. Your uk-resident Chinese nationals may not be tax resident.

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Replying to lukeylukeluke:
RLI
By lionofludesch
23rd Sep 2019 09:04

lukeylukeluke wrote:

Well they are uk resident. As for the rest, it doesn’t really look like I’m going to get much help here despite me thinking this was a site for asking accountancy-related questions. Which is fine, it would be nice if many responders to this thread were a little more professional whether they are being paid or not as it really doesn’t give me good opinion of them. It feel like a teenage boys forum in here.

Another satisfied customer.©

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RLI
By lionofludesch
23rd Sep 2019 09:02

Just for the record, here are Lukey's questions and my answers.

-Do I need to register for VAT? I understand the threshold is £85,000 but I don't know if these can be classes as seperate businesses or if I do indeed exceed this figure anyway. I do not expect to reach this figure again.

No idea - there's not enough information. What are the terms of the contracts with your flat-owning mates ?

-Would I be better off if I registered anyway?

Unlikely.

-How much VAT do I need to pay/can claim?

Ridiculous question. No idea - there's not enough information. You'd need a list of all the transactions. Not every cost carries VAT.

-If I can offset this year's personal profits against 2 losses incurred in 2017 and 2018 to fall below the £11,500 allowance will this change things?

That's a big "if". Much, much more information needed about those losses.

-Would there be a better/more tax efficient way for me to organise these things?

Almost certainly but there's not enough information to say what the optimum route might be.

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By paul.benny
23rd Sep 2019 09:05

Mr Luke

The first sentence of the first response was spot on.
I'm sorry that you found the responses unhelpful. The fact is, you are in lots of different sorts of sh-it - but don't seem to appreciate it.

For example
You are, de facto, an estate agent, even though you may not think of yourself as such. That means you have obligations under anti-money laundering regulations, which include registering with HMRC as supervisor and having appropriate procedures. Failure to register is an offence and you are in line for penalties - see https://www.gov.uk/guidance/registration-guide-for-estate-agency-businesses.

You mention some 2017 losses. That suggests you should have submitted a tax return for 2017/18 - which is now well overdue - which means there will be probably be penalties due

From the information given, it doesn't seem that you should be VAT-registered. But if you should have registered, guess what? Penalties.

I could go on, because there could be much more.

You really do need to pay a professional to sort this out.

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Replying to paul.benny:
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By Matrix
23rd Sep 2019 18:44

Why does an estate agent need to register with HMRC for AML? Thanks

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Replying to Matrix:
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By Wanderer
23rd Sep 2019 18:51

https://www.gov.uk/guidance/registration-guide-for-estate-agency-businesses

(but not if a lettings agent only carrying out lettings work)

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Replying to Wanderer:
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By Matrix
23rd Sep 2019 18:56

OK thanks. But only if you are agent for buying and selling property.

Do you know why an Airbnb business has to register for VAT?

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Replying to Wanderer:
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By Matrix
23rd Sep 2019 19:30

Thanks. I didn’t know I had any Airbnb clients but I have 3 clients who have submitted such income this month who didn’t discuss it with me in advance so will need to swot up.

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Replying to Matrix:
RLI
By lionofludesch
24th Sep 2019 10:24

Matrix wrote:

OK thanks. But only if you are agent for buying and selling property.

Do you know why an Airbnb business has to register for VAT?

I've not had much dealing with Airbnb but are these not effectively holiday lets ?

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Replying to lionofludesch:
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By Matrix
24th Sep 2019 14:51

Maybe but isn’t there rent a room relief? Clients seem to think that if they fall within the 90 day rule there is no tax! However at least they are giving me the figures.

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Replying to Matrix:
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By lionofludesch
24th Sep 2019 15:03

Oh - they're living there with the guests, are they ?

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Replying to lionofludesch:
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By Matrix
24th Sep 2019 16:18

Yes it seems that Londoners rent out their room when they are away for Christmas or the weekend these days. So I need to learn all about it to see if rent a room, FHL, VAT or the £1,000 exemption are in play.

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Replying to Matrix:
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By lionofludesch
24th Sep 2019 16:22

Matrix wrote:

Yes it seems that Londoners rent out their room when they are away for Christmas or the weekend these days. So I need to learn all about it to see if rent a room, FHL, VAT or the £1,000 exemption are in play.

Ah - so they're NOT there when the guests are visiting.

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By lesley.barnes
24th Sep 2019 19:55

The poster's scenerio was set up to beat the system. He was letting all his rented flat for 90 days and letting rooms in his flat whilst he lived there for the rest of the time. These are treated as FHL rather than rent a room. The other two flats were in other people's names, he was paying the rent for the flats and collecting the rent from guests. These flats were also let fully for the 90 days and rooms let whilst the host lived there for the rest of the time. The host was getting paid by the poster who couldn't live in all three flats at once. In London you can only let the whole of the property through Airbnb for 90 days after that you need to live in the property whilst hosting guests. If you want to let your property through Airbnb for more than 90 days you need to get a licence from the council. As the poster wasn't the owner of the properties he couldn't get a licence. If Airbnb find properties breaching this they remove them. All that said it's nothing to do with completing his tax return or VAT but it would it could have MLR implications.

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