In light of HMRC’s recent investigation into Airbnb hosts and their earnings data, holiday-let property owners must take proactive steps to ensure they comply with tax regulations. It’s been observed that property owners have inadvertently or deliberately failed to disclose their earnings. Failure to declare earnings for tax purposes can result in a financial penalty or at worst, criminal prosecution.
What can holiday-let owners do to ensure they comply with regulations?
So, what can holiday-let owners do to ensure they are paying the correct tax, and what support is out there for property owners who are not paying the correct tax? This article explores how holiday-let owners can navigate tax compliance and utilise the government’s Let Property Campaign (LPC) to rectify any errors.
Seek professional advice for accurate tax calculation
Income earned from holiday-let properties is considered taxable and varies based on individual circumstances. To avoid discrepancies and ensure property owners are paying the right amount of tax, owners should seek professional tax advice. This proactive measure can help identify and correct any potential errors before they escalate.
Making a disclosure through the LPC
In the event that a landlord or property owner discovers they haven’t paid the correct amount of tax, they can notify HMRC online about their intention to make a disclosure using the LPC. After acceptance into the LPC, they (or their advisors) have a 90-day period to calculate their tax, along with any interest or penalties owed.
Correcting errors
In most cases, tax mistakes arise from misunderstanding complex rules. The LPC provides a civil environment for holiday-let owners to rectify these errors. Taking a proactive approach and disclosing mistakes promptly is essential.
With the recent request for data from Airbnb, HMRC has shown that it is willing to take proactive steps to identify and recover unpaid tax. It is therefore imperative that holiday-let owners and landlords avoid taking a ‘wait and see’ approach, or they could soon find themselves in a difficult situation, potentially resulting in a time-consuming and stressful investigation into their tax affairs.
Any HMRC-led enquiry will result in negative consequences for the owner or landlord, including a loss of control, increased financial penalties, and the possibility that other areas of their tax liabilities may be the subject of scrutiny.
Let Property Campaign: A solution for disclosures
The Let Property Campaign was established by the government over a decade ago to facilitate tax disclosures for residential property owners, including those on platforms like Airbnb. It offers a constructive pathway for correcting tax oversights and omissions. This is likely to be the primary disclosure facility for any Airbnb hosts who have been contacted by HMRC.
Engaging with tax professionals for support
To avoid further errors during the disclosure process, seeking assistance from tax professionals is highly recommended. Depending on the nature of the tax issue, the investigation could span several years. Therefore, owners and landlords should ensure their records are in order, to ensure the 90-day submission window is met. If there are concerns over missing or incomplete records, that should not stop the individual from seeking professional advice as workarounds can be found.
Proactivity is the best cure
Holiday-let owners will find that being proactive and fixing any mistakes is a simpler, less stressful process provided they understand the requirement to make a full disclosure. Owners of holiday-lets can reduce the likelihood of future tax enquiries by getting independent guidance when necessary to ensure they are meeting their tax regulations.
If you have any queries or questions regarding the above, please do not hesitate to contact our Tax Disputes and Disclosures Team below: