Disclosing letting income

Airbnb is a hot topic in Edinburgh with some estimates putting the figure of registered Airbnb lets in the city as high as 12000 in 2018. Whilst plans to regulate short term lets further in Scotland are presently playing out in the Courts, any walk around Edinburgh will tell you that holiday lets are a major part of the city’s tourist economy. Recent press reports indicate that HMRC is also taking an interest, and that the tax authority has requested data from Airbnb. This has been confirmed on Airbnb’s website.

HMRC gets information from numerous sources, including Letting agents, Land Registry, Council tax records, Mortgage applications, and tip-offs, (often from disgruntled ex-tenants). HMRC uses its ‘Connect’ database to compare all this with submitted tax returns. This year, HMRC has re-energised its property letting campaign and has already issued hundreds letters to those it suspects may not have paid the correct amount of tax on their rental income.

Property income taxation can be complex with differing rules around furnished holiday lets, commercial lets, rooms let in your own home, foreign properties and relief for expenses. HMRC provides a number of useful mechanisms for making a tax disclosure, including its long running Let Property Campaign, which can be a good solution for more straightforward cases. Sometimes, a different approach might be necessary, but HMRC will often be pragmatic when seeking to resolve issues, particularly when the taxpayer takes the initiative in putting things right. Whatever the approach, a managed voluntary disclosure will normally produce a better outcome than awaiting HMRC intervention.