HMRC compels Airbnb to disclose host earnings in tax probe

HMRC compels Airbnb to disclose host earnings in tax probe

Airbnb, the popular online holiday let platform, has come under scrutiny from HM Revenue & Customs (HMRC) in an extensive tax investigation dating back to the 2017-18 financial year.

The probe aims to identify and address tax discrepancies related to rental incomes earned by hosts using the platform. As part of this crackdown, Airbnb has been compelled to disclose user income details to the HMRC.

The UK tax authority has sent 800 reminder letters since February 2023 to suspected individuals believed to be underpaying taxes related to their Airbnb proceeds. The reminders underscore the necessity to disclose rental income. Property owners who have failed to pay their due taxes face possible criminal prosecution and penalties of up to 30% of the tax owed.

Experts observe this aggressive approach as a departure from HMRC’s earlier, more gentle nudges towards tax declaration. The investigation utilises HMRC’s powerful supercomputer, the Connect system, allowing a granular examination of individuals’ tax affairs using thousands of data points.

Accountancy firm HW Fisher told The Telegraph this move is indicative of the heightened concern about undeclared income from platforms like Airbnb. Richard Morley, a partner at the firm, called the information from Airbnb a potential “goldmine” for HMRC.

UK law permits the HMRC to investigate and gather information going back up to 20 years if evidence of unpaid tax in a previous year is found. Currently, Airbnb hosts can earn up to £1,000 tax-free per year for whole properties, and up to £7,500 tax-free for a room in their own house under the government’s rent-a-room scheme.

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.”

HMRC maintains that the investigation is a “routine activity”, as it annually sends out thousands of reminder letters about various areas of tax.

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