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HMRC receives Airbnb letting data

Landlords should realise that HMRC will know about their lettings through Airbnb, so full disclosure of all their taxable property income is essential, including for all prior years.

2nd Oct 2020
Tax Writer Taxwriter Ltd
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HMRC has access to AirBnB UK rental records
iStock_AirBnB app_stockcam

The Airbnb UK accounts for the year to 31 December 2019 include a statement that the company will share data with HMRC about the earnings of hosts (those who let out property) on its UK platform in the years 2017/18 and 2018/19, Reuters reported.

This should not come as a surprise to tax advisers, as HMRC has been using its Connect data analysis system for years to scrape data concerning property income and gains from various sources. However, it is a jolt to see the relationship between the online platform and HMRC stated so bluntly.

Opening enquiries

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 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 up tax enquiries going back some years.

Guidance

All online platforms providers in the gig economy have come under pressure from tax authorities round the world to ensure that their customers pay tax on their earnings.

To help nudge their hosts in the right direction Airbnb provides a short note written by PwC on tax considerations for short term lettings on its website. This was last updated in January 2019, so it could do with a refurbishment. 

The guidance note doesn’t advise landlords how to declare income from property in past tax years, or what to do in the case of a tax enquiry, neither does it mention capital gains tax.

An earlier 49-page guidance note produced for Airbnb by EY in 2018 is far more comprehensive as it includes sections on income as well as gains, and a very useful chapter on how to complete a self-assessment tax return. There is also a short list of points taxpayers may make get wrong, such as not registering for self-assessment when they need to.     

What to declare

The Airbnb insight report for 2017/18 says the annual earnings from Airbnb by a typical UK host is £3,100, (£3,800 in Scotland). This lies within the room-a-room relief allowance of £7,500, so would not generate a tax reporting obligation for a host who only lets out part of their main home.

However, letting a second or third home that generates income in excess of £1,000 in a tax year will create a tax reporting obligation. The £1,000 limit is the trading and miscellaneous income annual allowance that can apply to letting income that doesn’t fall within rent-a-room relief.  

How to declare

If the landlord hasn’t declared their rental income, and it is not covered by rent-a-room relief or the miscellaneous trading income allowance, this situation should be swiftly corrected.

Where the taxpayer has submitted a tax return, and it is still in date for amendment, it should be amended without delay. The 2018/19 tax return can be amended by the taxpayer until 31 January 2021.

Where the omitted property income or gain relates to earlier tax years the taxpayer should consider disclosing under HMRC’s let property campaign.

This disclosure service has been running for over seven years, but it is only open to individuals who let UK residential property. It can’t be used to declare income from non-residential property or where the property has been let through a company or trust. Where the let property is located overseas the worldwide disclosure facility should be used.

The advantage in using the let property campaign to disclose is that the penalties charged for non-disclosure will be much lower than if the taxpayer waits for HMRC to contact them. If full disclosure and payment of the tax is made before HMRC spots there is a problem, the penalty can be reduced to nil.  

Airbnb’s tax

The Airbnb UK accounts also show that the company has settled a tax dispute of its own with HMRC, paying an additional £1.8m in tax. It is not clear what years this extra tax relates to, but its declared corporation tax liability for 2019 was £1.1m compared to £146,000 declared in the 2018 accounts.

Replies (13)

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By ComanCo
03rd Oct 2020 17:04

One would expect to see HMRC enquiries resulting from the submission of AirBnB accounts for the year to 31 December 2019. You are correct to point out rent-a-room relief of £7,500, the trading allowance of £1,000, and other types of expenditure: https://comanandco.co.uk/lodger-and-guest-house-income
It would be prudent for landlords to pre-empt HMRC enquiry, so that any disclosure can be regarded as voluntary (rather than prompted) and therefore any late payment penalty will be lowered.
Some AirBnB landlords could also consider ramping up activities to qualify for furnished holiday lettings especially if a sale is being contemplated imminently

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By Mr J Andrews
05th Oct 2020 10:03

Am I missing something.
Did not Airbnb landlords realise at the outset that such income may have had some tax consequence ?
Considering there are now almost 1/4 million such income generators since inception in 2009 , this should be a nice little earner for HMRC from those who thought otherwise.

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Replying to Mr J Andrews:
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By ds
05th Oct 2020 10:20

But do they have to resources to pursue these Airbnbers ?

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Replying to Mr J Andrews:
blue sheep
By NH
05th Oct 2020 10:22

If you are earning in excess of £7500 a year from this there can be no excuse, any reasonable person should know there are tax implications to earning that much money.

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Replying to Mr J Andrews:
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By Moo
08th Oct 2020 17:08

There will be an element within the Airbnb letting community who find tenants that way precisely because the rentals were not being reported through to HMRC. We all know that letting agencies have been obliged to file returns with HMRC for years now and presumably the holiday let agencies do too, some landlords will have been deliberately sidestepping that .
I am sure that a sizeable proportion of landlords on Airbnb think that is a tax free way to get money just as a sizeable proportion of people with small businesses on ebay and similar marketplaces think the same.

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By Ian McTernan CTA
05th Oct 2020 11:13

Excellent news. It's been a long time coming, but we've known this sort of information sharing has been on the way.

Will probably generate more work for us as HMRC are bound to send out enquiry notices even where the amounts are below the £7500, as until it's established the rental falls within the exemption HMRC will assume it's all taxable.

If you have any clients you think might be at risk then it's time to fire out an email talking about this and pointing out the disclosure facility before HMRC get to issuing those notices.

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By plummy1
05th Oct 2020 11:51

Not forgetting that if the property qualifies as an FHL the owners should be looking to claim for any "embedded fixtures" in the property to offset against any tax liability. Where the property was previously purely residential their entitlement to claim is relatively straight forward.

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By SteveHa
05th Oct 2020 12:30

Quote:
However, letting a second or third home that generates income in excess of £1,000 in a tax year will create a tax reporting obligation.

Not necessarily. If the rental income is the only income, then anything up to £13,500 can be received without creating a reporting obligation.

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Replying to SteveHa:
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By accountant2510
05th Oct 2020 17:37

SteveHa wrote:

Quote: However, letting a second or third home that generates income in excess of £1,000 in a tax year will create a tax reporting obligation.

Not necessarily. If the rental income is the only income, then anything up to £13,500 can be received without creating a reporting obligation.

According to HMRCs website:

Contact HMRC if your income from property rental is between £1,000 and £2,500 a year.

You must report it on a Self Assessment tax return if it’s:

£2,500 to £9,999 after allowable expenses
£10,000 or more before allowable expenses

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Replying to accountant2510:
By SteveHa
06th Oct 2020 09:27

HMRC's website is wrong. Read TMA 1970 S7 & S8.

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Replying to SteveHa:
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By ComanCo
12th Oct 2020 00:53

SteveHa wrote:

HMRC's website is wrong. Read TMA 1970 S7 & S8.

An interesting point. Technically, HMRC's website is wrong but the approach taken in practice is welcome where tax at stake does not warrants lower tax compliance costs.
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Replying to SteveHa:
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By Moo
08th Oct 2020 17:01

I had a discussion along these lines with a tax man last week who insisted that a full time student whose only income is about £4k rental profits had to register for self assessment. I said quote me the statute and he basically said 'we make the rules'. Digging into it deeper the logic was to build up the record of losses, unrelieved finance costs etc whereas the student's sister in a similar position but with a few weeks PAYE work didn't need to file returns on the basis that they could code out her rental income - she is still under the personal allowance so that is nonsense too. Unfortunately as many HMRC staff are working from home they are less able to take advice from older and wiser colleagues who would have told them not to be so damn stupid.
I'm not too bothered because there is residential mortgage interest and filing returns will get the unrelieved amounts on record and carried forward but it makes a nonsense of whichever Chancellor claimed we would soon not need to file returns.

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By ComanCo
12th Oct 2020 11:05

Bosched out an news report on the subject over the weekend: https://comanandco.co.uk/airbnb-host-data-shared-via-the-2019-accounts

Thanks for posting

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