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Concern about Airbnb Tax Bills

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There’s been a lot of discussion about Airbnb in the media ever since it emerged that Airbnb hosts face retrospective tax bills for 2014. We’ve received quite a few calls from RTE, TV3, Today FM and the Daily Mail amongst others asking us to outline the tax position for Airbnb hosts as understandably many of them are concerned about how they’ll be affected.

While it’s undeniable that Revenue’s decision to identify the people who have taxable earnings as a result of Airbnb hosting activities will sting hosts financially it’s important to note that people are not in trouble with the Revenue for not declaring this income as the filing deadline for the relevant period has not yet passed.

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Our Tax Manager Barry Flanagan explained: “Airbnb confirmed on Friday that they had handed over details of the earnings of Airbnb hosts to Revenue including their names, addresses and income earned since May 2014. However, as the filing deadline for the 2014 tax year is not until 31st October this year, there is no cause for alarm. Landlords and Airbnb hosts have plenty of time to report this income via their 2014 tax return. No penalties, interest or late fees will be due on this income if the return is filed and tax paid over before the due date.

“Airbnb have given all hosts a very clear “heads-up” that Revenue now know about this income so we would advise all hosts to ensure they are fully compliant and income is reported with tax paid on the profits.”

Airbnb income is not covered by the rent-a-room relief

We first covered this story back in April when Revenue stated that any income earned through renting out rooms / homes or apartments through Airbnb would be treated as taxable income and should subsequently be declared. It came as a bit of a blow to some people who had thought that this income would fall under the rent-a-room tax relief threshold of €12,000.

However, there may still be ways to reduce your tax bill. According to Barry: “We would advise people to keep a record and receipts of any expenses incurred through hosting activity. Revenue have concluded this income should be treated as trading income and therefore it stands to reason that any allowable trading expenses should qualify as deductions in arriving at a taxable trading profit. The test for whether the expenses are allowable is the same standard as for any other trade – are the expenses incurred wholly and exclusively for the provision of the service in the ordinary course of business”.     

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The Tax Position

The Revenue guidance distinguishes short-term 'guest' lettings from a longer term 'residential' lettings. Barry explained: “There is a precedent for this; traditionally income from a 'bricks and mortar' Bed and Breakfast is subject to different tax treatment than from income generated from renting a room in your house. The distinction is that people who run a B&B are considered to be engaged in a trade while someone who rents a room in their house is not. Many availing of rent-a-room relief would have other professions - that income is more incidental or casual. 

So Revenue has considered the position for Airbnb and sought to align the treatment with one of the above. In this instance it has decided that the Airbnb landlord is closer to a traditional B&B landlord than to an individual who rents a room for 'residential' rather than 'guest' purposes”. 

Like anything tax-related, it’s better to comply with Revenue guidelines at the outset to save any further surprises down the line. If you’re a worried Airbnb host, talk to our Kilkenny Tax Team who can help you file a tax return and stay compliant with Revenue guidelines.

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About The Author

Sinead Gill - PR & Communications Manager @ Taxback.com

Hello. I live and breathe communications and love finding different and original ways to reach an audience. The challenge lies in trying to keep things fresh even when it’s a topic you’ve covered before. Branding, PR and communications are the three cornerstones of what I do so it’s a very interesting job!

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