British landlords who use rental platforms to let holiday homes in the European Union will soon have to pay VAT on their rental income.
Under the EU's VAT in the Digital Age scheme, from 2025, these landlords will need to pay an average of 20% VAT, regardless of whether they live in the same country or outside the EU.
According to Tax Assist Accountants, the charge will be applied to platform operators such as Booking.com and Airbnb, requiring landlords to factor this cost into their rental fees to maintain profit margins.
The EU predicts that almost three-quarters (70%) of accommodation providers using on-demand platforms such as Airbnb and Booking.com aren't VAT registered.
This will cause administrative headaches for operators, who will need to notify each applicable member state which providers are VAT-registered and those who don't yet have VAT numbers.
This also includes firms that act as local agents for landlords owning holiday villas, apartments and cottages across Europe.
The programme is designed to make the EU's tax rules in the travel and hospitality sector fairer; due to the complexities surrounding VAT registration, hotels and conventional taxi services currently pay VAT on all the sales they disclose, unlike independent landlords and taxi services.
The firm says that it's possible Chancellor Jeremy Hunt could monitor the success of the programme and consider taking a similar path to improve tax parity.