Holiday let owners have been urged not to under-declare their income – as the HMRC views landlords as an “obvious target” for tax investigations according to Hacker Young chartered accountants.
The HMRC can request information from the likes of Airbnb to check whether a taxpayer is paying their fair share. Hacker Young said their algorithms can fairly easily identify holiday homeowners who are under-declaring their income.
Due to travel restrictions caused by the pandemic more people chose to holiday in the UK this year, resulting in a boom for UK holiday lets, so the government will expect tax receipts to rise.
Landlords in the short-term sector will submit their self-assessment tax returns ahead of the January 31 2022 deadline. Many will be tempted to under-report the windfall earnings they have made in that period.
Neela Chauhan, a partner at Hacker Young, said: “With the boom in staycations driven by the pandemic, leading to a bumper season for UK holiday lets, it’s likely HMRC will come for their slice of the pie.
“HMRC will be checking tax returns from people who have let property for a jump in declared income to reflect the staycation boom. Their algorithms will fairly easily identify those holiday homeowners who they think are under-declaring income.
“As HMRC’s Let Property Campaign targeting buy-to-let landlords shows, the Treasury sees landlords as an obvious target for tax investigations and extra tax revenue.
“Landlords are recommended to make sure they are aware of their tax obligations before spending their summer ‘staycation’ windfall.
“Landlords who fail to declare unpaid taxes are ultimately risking fines and criminal prosecution.”
In 2020 Airbnb agreed to share information on income earned by its UK hosts as part of a 2020 tax settlement with HM Treasury. It also paid HMRC an extra £1.8m in tax.
During the summer some sites saw bookings rise by up to 300%, while the cost of holiday lets rose by as much as 35% in some hotspots.
The Let Property Campaign invites landlords to get up to date with their tax affairs.
In response to Hacker Young’s comments the HMRC played down talk of a crackdown.
A spokesperson said: “HMRC believes that the vast majority of customers want to pay the right amount of tax, including owners of UK holiday lets, and we will continue to work with such customers to help them to get their tax right.
“People with additional income streams may not be fully aware of their tax obligations and so we have taken steps in HMRC to consider sectors, such as short-term property letting, where we may not be collecting the full amount of tax owed,”