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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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.
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.
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.
LOL. You can’t find an affordable accountant??!
Another one who completely disrespects the very profession whose advice he badly needs.
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.
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.
Also there’s no ‘crime’ for which proceeds are being ‘laundered’
How do you know your friends aren't committing crimes ?
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 ?
I will direct my questions elsewhere.
Great news. Thank you.
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.
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.
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.
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.
Well they are uk resident.
'Resident' has a particular meaning in tax world. Your uk-resident Chinese nationals may not be tax resident.
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.©
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.
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.
https://www.gov.uk/guidance/registration-guide-for-estate-agency-businesses
(but not if a lettings agent only carrying out lettings work)
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?
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.
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 ?
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.
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.
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.
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.