Airbnb has agreed to provide HMRC with details of its UK hosts’ income, having provided a statement in their accounts to 31 December 2019 stating that they would share data with the tax authority on hosts’ income in the financial years 2017/18 and 2018/19.
This will allow HMRC to check the accuracy of information reported on tax returns and to identify rental income discrepancies. If HMRC can prove that income has not been reported properly by Airbnb hosts, they can then move to open an enquiry under the discovery provisions going back as far as 20 years.
HMRC have advised that they will start cross checking the Airbnb data in the year to 5 April 2022. If HMRC believe that there is underpaid tax, they will seek to recover this plus penalties and interest, with penalties being up to 100% of the tax due.
Any Airbnb hosts who are concerned about whether they have reported rental income correctly have a short period of time to consider making a voluntary disclosure to HMRC. Making such a disclosure will help minimise the risk of expensive penalties.
What to declare?
It is important to note that some landlords wrongly assume that they are not making a rental profit because of their mortgage costs. Unfortunately, it is only the mortgage interest on any mortgage payment that qualifies for tax relief. Also, foreign landlords do not always realise that they have a UK tax reporting requirement.
Airbnb has previously reported that the average annual earnings by a typical UK host is £3,100. This is within the rent-a-room relief allowance of £7,500, hence this would not generate a tax reporting obligation for a host who only rents out part of their main home.
If an individual lets a second or third home that generates income in excess of £1,000 in a tax year, however, this will create a tax reporting obligation as it is above the miscellaneous trading income allowance.
How to declare?
If you have 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 speaking to a qualified tax professional who will be able to help them and discuss HMRC’s let property campaign.
This disclosure service has been running for several 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.
It is likely that if you use the let property campaign to disclose, any penalties charged for omitting the declaration originally will be much lower than if you wait for HMRC to approach you. If full disclosure and payment of the tax is made before HMRC spots there is a problem, the penalty can potentially be reduced to nil.
The campaign is open to:
– Those renting out a single property
– Those renting out multiple properties
– Specialist landlords (e.g. student accommodation)
– Renting out a room in your main home for more than the ‘rent a room scheme’ threshold
– Overseas landlords renting out a UK property
– UK landlords who rent out property abroad
– Renting out a holiday home even if you use it yourself
Where the let property is located overseas, the worldwide disclosure facility should be used.
Here to help
If you are concerned that you could be affected by Airbnb’s sharing of income data with HMRC, and think you need to make a disclosure, our team can help.
To find out how we can help you prepare a disclosure or update your records, please contact Jonathan Cunningham using the button below.