Property owners letting on platforms such as Airbnb could be facing bigger tax bills than expected.
Confusion is rife among Airbnb hosts in Ireland following an update issued by Revenue on 17 April around the tax treatment of their expenses.
Taxback.com, the official partner of Airbnb, said that although the changes are not large, they still pose significant issues and those who let properties on site should be aware of them.
Airbnb hosts may need to pay more
Director with Taxback.com, Barry Flanagan, said that the notice from Revenue has “definitely prompted people to come forward and check its impact on them personally”, noting a spike in calls received since the e-brief was issued.
With the latest update, Revenue has aimed to clarify which expenses related to provision of short-term accommodation are allowable as tax deductions, as well as the circumstances under which these would be allowable. There will be certain expenses that hosts will no longer be able to claim to offset their tax bill.
If the property is expected to be available for rent on a regular basis as opposed to a once-off or occasional basis, any income from this will be taxed under ‘Schedule D Case I’. Capital allowances for things such as wear and tear on a property are allowable under this this category.
The changes will affect those who use their property occasionally as an Airbnb letting. Those who host less regularly will be taxed under ‘Schedule D Case IV’. These individuals will not be granted capital allowances or pre-trading expenses.
Flanagan said hosts need to consider which bracket they belong in, as this will impact the amount payable to Revenue at the end of this year. “There is distinct differentiation between frequent and occasional hosts and what they are allowed to write off in expenses. It is the host themselves who is responsible for determining which category they fall into.”
Hosts want to clarify obligations
There is some overlap in how Revenue examines general expenses, regardless of the frequency of use of the property as an Airbnb letting. Expenses incurred directly in the provision of the accommodation, such as cleaning fees, breakfast and electricity, are allowable but insurance and TV licence costs are not directly related to the property as an accommodation service, so they will not be permitted as deductibles.
“Every time there are any developments in relation to tax and Airbnb, we see more and more hosts contacting us to clarify their obligations. This is encouraging as it means that people are keen to be compliant and to ensure they meet their tax responsibilities,” Flanagan said.
In Ireland, hosts earned €115m in 2017 with Airbnb and the average host had guests for 37 days out of the last year. There are 22,800 active listings, with that figure consistently on the increase, and 1.2m guests who used the platform to stay in Ireland in 2017 came from abroad.