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HMRC targets short-term rental hosts in tightened tax crackdown

UK: Airbnb hosts suspected of not declaring their rental earnings are facing a potential 20-year tax investigation from His Majesty’s Revenue & Customs [ HMRC ] that covers six years of income information, as part of a wider crackdown on the sector’s activities by the UK tac authority.

It comes as Airbnb was forced to share the income details of all UK hosts on its platform dating back to the 2017-2018 financial year with HMRC, which has set out to identify owners who rent out their properties as short-term lets without declaring how much they are earning each year.

Airbnb hosts have been made aware that their data is being disclosed with the taxman, and the company is promising to support them when it comes to understanding tax compliance and their obligations.

HMRC is also targeting hosts and owners on a number of online rental platforms within its tax crackdown.

Under the current laws, since data sharing began in 2018, hosts renting out properties through online rental platforms are able to make £1,000 a year before tax under a ‘tax allowance’, with any profits above that amount needing to be declared to HMRC. Those renting out a single room in their property have a much higher income threshold before they have to pay tax [£7,500] as part of the government’s ‘Rent-a-Room’ scheme.

However, those who fail to pay their income duties are being warned that they could face criminal prosecution as well as strict penalties of up to 30 per cent of the tax they owe, according to Richard Morley, a partner at accountancy firm HW Fisher, when speaking in The Telegraph.

Should HMRC uncover evidence that hosts have not paid any or enough tax in previous financial years, it would also have the authority to open an investigation to obtain evidence dating back 20 years under so-called ‘discovery laws’, Morley added.

Hosts or owners deemed to have made an innocent error or to have been careless could potentially face no penalty at all, though those deemed to have made deliberate errors in disclosing their incomes would likely face harsher penalties and possible criminal charges.

HMRC is encouraging taxpaying hosts and owners to disclose their income voluntarily if they have not done so already through its Let Property Campaign, which would lower the amount of any potential penalty.

An Airbnb spokesperson said: “Hosts want to pay their fair share of tax and we want to help, which is why Airbnb partners with industry experts across the UK to help hosts understand and follow tax rules.

“We also work with HMRC to share information and help ensure that UK authorities receive the taxes they are due, in accordance with UK laws. The typical UK host shares their own home for just two nights a month, and one-in-three say the extra income helps them afford rising living costs,” they added.

Meanwhile, an HMRC spokesperson told The Daily Mail: ‘Each year we send out thousands of reminder letters on various areas of tax. We believe our customers want to pay the right amount of tax and by working with online rental platforms, as well as issuing these reminders, we’re taking steps to help make it as easy as possible for people to get their tax right.”

In a wider context, the UK Government is planning to introduce tightened regulations on the short-term rental sector later this year, whereby hosts would be obliged to obtain planning permission if they want to let out their property / properties on online platforms such as Airbnb.

The Department for Culture, Media and Sport is currently holding a further consultation on a new registration scheme for short-term rentals in the UK, meanwhile The Department for Levelling Up, Housing & Communities is holding its own consultation on the introduction of a use class for short-term lets and associated permitted development rights, which closes on 7 June.

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