Landlords beware: Airbnb shares tax data with HMRC
Land Taxes » October 28, 2020
You may at be risk from a HMRC investigation if you have rented property through Airbnb and failed to correctly declare the income.
Airbnb recently announced that they will be sharing hosts’ data with HMRC. They have reported in their 31 Jan 2019 accounts that they will tell HMRC about hosts’ income from 2017-18 and 2018-19. However, these aren’t the only years at risk. HMRC can enquire into tax returns for the 4 previous tax years if they think you have made an innocent error, increasing to 6 years if the error was careless and up to 20 years if the error was deliberate. Therefore, if you have undisclosed property income you will want to act quickly.
If you have rented out rooms through Airbnb you would have been able to benefit from Rent A Room relief if all the conditions were met. This relief is automatic (and therefore does not need to be claimed). It will apply if:
- The room or property is furnished
- Is within your main home
- You (the host) live in the UK
- Is a residential space and not an office/business room
- Total rental income for the year is under £7,500
The rent a room relief allowance is £7,500 (or £4,250 for 2015-16 and earlier).
If you meet all of the above conditions then you do not need to report the income on your tax return.
However if you do not meet all of the conditions the income should have been reported on your tax return.
Who is impacted?
Therefore the failure to disclose will only apply if:
- You fail to meet the above conditions
- The gross rent received was over £7,500 (or £4,250 for 2015-16 and earlier)
- This income was not reported on you tax return
Is the relief per person?
No the relief is per household so if you own a property with your spouse the amount of rental income you could each receive is £3,750. If you own the property with more than one other person there is a slightly quirky change to the above. Do seek further advice if that applies to you.
What if my rental income was only slightly above £7,500?
Strangely if your rental income from Airbnb (or similar platform) was £8,000 you have to elect if you want to use rent a room relief. The default position would be that you would report your rental profits. This would be your total rent less all of your expenses. Therefore, if your expenses are less than £7,500 it would typically make sense for you to claim the relief.
So, whilst the tax liability may be quite small you will still need to report the income on your tax return and make the claim.
What is the impact?
The potential impact of failing to disclose the income is not just the tax due on the income but also potential penalties. Additionally, HMRC could open up investigations into earlier years which can be costly and time-consuming. Two things that no one needs mid divorce.
What should I do?
If you think you may have failed to disclose your rental income correctly you have a couple of options.
For the 2018-19 tax year (April 2018 to April 2019) you have until 31 Jan 21 to amend your tax return.
For earlier years you can notify HMRC of the error through their Let Property Campaign.
The penalties that you may be charged are reduced if you contact HMRC before they reach out to you.
If you do receive a letter from HMRC do not ignore it and either contact them directly or seek tax advice.
How can we help?
We have extensive experience in making disclosures to HMRC either via the Let Property Campaign or through direct communication with HMRC. Please reach out if you think we can assist you.