If you’re a landlord who lets a property through Airbnb then listen up! HMRC have complete visibility of those lettings (past and present), and so have a think back to your tax returns, and whether all of your income has been declared. If not then now is the time for complete disclosure of all taxable income from your properties.

What’s been announced?

As reported by Reuters, a statement from the Airbnb UK accounts for the year to December 31^st revealed that they will be sharing the earning of hosts’ data with HMRC, from 2017/18 and 2018/19. HMRC has been using its Connect data analysis system for a number of years to scrape property income and gains data from various sources, so this announcement shouldn’t come as a surprise to tax advisers. What appears to be shocking is the bluntness and speed of the relationship which HMRC and Airbnb have formed.

Opening enquiries

Having access to this data from Airbnb will allow HMRC to target enquiries into individual’s tax affairs who haven’t declared their letting income for 2017/18 and 2018/19. The deadline to open any enquiries into a self-assessment return for 2018/19 is the 31^st of January 2021, but only if the return was issued and submitted on time.

Whilst this is the case, HMRC are able to go back much further (by up to twenty years in some cases), as the discovery rules now allow them to do so. HMRC have been reported saying that it will address any issues over landlord’s tax payments in 2021/22, but landlords should be prepared for records going back some years to be open for enquiries.

Guidance

The gig economy has really been under the spotlight recently, as pressure from tax authorities from around the world has been laid on thick to ensure their customers are paying the correct amount of tax on their earnings.

Airbnb has subtly helped to nudge their customers in the right direction by providing a release on tax considerations, written by PwC on its website. Whilst this can be seen as giving its customers proactive advice, the release was last updated in January 2019, so it could do with a refresh given recent announcements. It also does not mention Capital Gains tax, how landlords should declare income from their property in past tax years, or what they need to do should they be investigated.

A 2018 guidance note produced for Airbnb by EY has more comprehensive guidance on income including gains, and how to complete a self-assessment tax return. It also includes a short list of things many taxpayers might get wrong when submitting their tax return.

What do you need to declare?

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

But should a host let out a second or third property which generates an excess income of £1,000 in any tax year, a tax obligation will have been created. The £1,000 limit refers to the trading and miscellaneous income annual allowance, which can apply to letting income which isn’t included within the rent-a-room relief.

How to declare

If a landlord hasn’t declared their rental income (which isn’t covered by the miscellaneous trading income allowance or the rent-a-room relief), they must rectify this as soon as possible.

If they have already submitted their tax return and it’s still within the date for amendment, then it should be amended right away. The 2018/19 tax return can be amended right up until the 31^st of January 2021.

If the omitted property income or gains is from a previous tax year, then the landlord should consider disclosing the amount under HMRC’s let property campaign. This service is only available to UK based properties, and those which have not been let through a company or trust. If the property is located overseas, then the worldwide disclosure facility should be used.

It’s worth knowing that by using the let property campaign and paying any penalties you receive from HMRC for undisclosed rental earnings, will be much less than if HMRC were to investigate you independently and find out that you’ve missed payments. If total payment for any missing tax and full disclosure of the mistake is made before HMRC even spots the issue, then the landlord may even be able to reduce any penalty to nil.

How can Vantage Accounting help?

Tax can be confusing, and if you’re not a qualified accountant it can be easy to make simple mistakes. And no one wants an investigation from HMRC, so why not leave it to the professional team at Vantage Accounting?

Specialising in rental accountancy along with many other professions, the Vantage team are here to help you pay the right amount to the taxman, leaving you free to get on with what you do best, managing your business.

Get in touch today or pop into your local accountancy. We’ll get the kettle on and look forward to chatting through your accounting needs.