Airbnb hosts face major HMRC tax crackdown

HM Revenue & Customs (HMRC) has launched an investigation into the tax affairs of Airbnb hosts, covering six years’ worth of income, it has been revealed.

The popular online holiday let platform has been compelled to disclose comprehensive earnings data of all its users to HMRC, as part of an effort to uncover any unpaid tax.

The scope of the investigation goes back to the 2017-18 financial year, and property owners who have neglected to fulfil their income tax obligations could now face hefty penalties of up to 30% of the tax owed.

Also, there is the prospect of potentially facing a criminal prosecution.

Crackdown shows how worried HMRC is

A partner at the accountancy firm HW Fisher, Richard Morley, told the Daily Telegraph that the crackdown shows how worried HMRC is about those who use platforms but do not declare their income.

He said: “It’s a massive area of risk for HMRC, the whole question of property and rental income that’s received.

“Getting information from the likes of Airbnb will be a bit of a goldmine.”

HMRC has reportedly sent 800 letters to Airbnb hosts

Since February, HMRC has reportedly sent 800 letters to Airbnb hosts suspected of not paying their fair share of tax.

The letters serve as reminders, urging the hosts to disclose their rental income derived from the platform.

Tax specialists say they have seen a big change in HMRC’s approach, as the authority has taken a more assertive stance compared to its previous attempts to encourage voluntary disclosure of rental income.

This latest initiative leverages the power of HMRC’s advanced supercomputer, known as the Connect system, which connects lots of data so HMRC can meticulously examine individuals’ tax affairs.

The authority is believed to be in the process of gaining a comprehensive understanding of the holiday let sector and identifying its participants before initiating enforcement actions.

‘Hosts want to pay their fair share of tax’

An Airbnb spokesman told The Times: “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.”

Investigate and gather information dating up to two decades

Should HMRC uncover evidence of unpaid taxes from previous years, it can investigate and gather information dating up to two decades previously under what are known as ‘discovery laws’.

For Airbnb hosts who rent out entire properties, the annual tax-free threshold stands at £1,000, while those who rent out a room in their own home can earn up to £7,500 per year tax-free, benefitting from the government’s rent-a-room scheme.

A spokesperson confirmed to The Times: “This is routine activity — 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.”

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