The Irish and US tax authorities are forcing Airbnb landlords to disclose the lettings income of people renting out their homes online. It is expected that British users of the world-wide casual lettings website will face similar action soon, catching those who have failed to disclose income to the taxman.
British people renting out their spare rooms through Airbnb could soon find their details have been passed to HMRC, experts warn, after the company has been forced to share data about its Irish and US users with the tax authorities.
The Airbnb website allows people to rent out their accommodation on a short-term basis. It has recently been ordered by tax officials in Dublin to disclose its customer details to make sure that they pay the income tax they should on the extra earnings they receive from renting in this way.
Many renting in a short-term casual way, such as they do through websites like Airbnb or indeed by other means, may not think that the income they receive is not taxable, but HMRC think otherwise.
Airbnb in the UK has insisted that it will not share details about its British customers with HMRC, but tax experts have warned that they may not have a choice as the UK taxman has overriding powers that can force any company to hand over customers’ income details.
Richard Morley, a tax specialist at BDO Partners, has told Yahoo Finance that HMRC is making increased use of a legal provision called “section 36”, which gives it power to demand that third parties such as businesses or trade associations hand over data where HMRC suspects tax evasion on a wide scale.
Mr Morely said:
“HMRC undertakes spot checks on groups of earners, and then if it finds reason for concern it can use section 36 to forcibly access information on large groups of individuals.”
In addition, HMRC investigators regularly monitor websites such as Ebay and Airbnb, to discover if people are advertising rentals and earning rental income without declaring it.
One of the main sources of information obtained about tax evasion, surprisingly, is from informants, such as neighbours contacting HMRC.
In April 2015 online sellers using websites such as Ebay, Amazon, Airbnb, holiday letting websites and other internet retailers have been warned that they face one of the “biggest tax crackdowns in history” under government and HMRC plans to obtain details of millions of online transactions.
Sean Wakeman, tax investigations partner at Crowe Clark Whitehill, has told Yahoo Finance:
“It is inconceivable that when HMRC can demand information from the likes of Amazon and Ebay that it will not seek to exploit the relatively low hanging fruit of Airbnb.
“In the current age of transparency, it would be hard for Airbnb to hide behind any jurisdictional veil of secrecy. Individuals who have rented out rooms for sums in excess of the non-taxable rent-a-room allowance should take expert advice with a view to declaring any sums of tax owing thought to HMRC’s let property campaign.
“Assuming Airbnb does not store information on a UK server (where obtaining information by formal means would be very easy), it is likely that the UK tax authorities will call upon reciprocal agreements with the USA and/or the Republic of Ireland. As part of the European Community, it is also likely that the UK will seek to use European mutual assistance directives whereby information requests are effectively sub-contracted out to the Irish tax Inspector.”
Under current legislation homeowners are allowed to rent out rooms in their homes to up to two lodgers (sharing accommodation with the landlord) and earn up to £4,250 per annum tax-free. From April 2016 this is to be increased to £7500, the first increase in 19 years. Any earnings above these thresholds should be taxed at the earners’ marginal rate.
An Airbnb spokesman told the Daily Mail:
“We have informed hosts about the legal requirement for Airbnb Ireland to report host earnings to the Office of the Revenue Commissioners. This is a legal requirement for Airbnb Ireland – similar to our obligation to report host earnings in the US.”
British People Renting Out their Spare Rooms through Airbnb could soon find their Details have been Passed to HMRC – http://t.co/sKaFy88zEd
— LandlordZONE® (@LandlordZONE) August 21, 2015