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TODAY'S OTHER NEWS

Will HMRC’s tax grab spell the end of the short-let landlord?

A rental sector management firm is asking whether possible upcoming tax probes by HMRC may spell the end of the short-let landlord.

As we reported last week, Airbnb has passed details of financial transactions of 225,000 people who let out homes and rooms through its site to HM Revenue & Customs.

Now David Alexander, joint chief executive officer of PropTech rental platform apropos, wonders whether this could potentially result in substantial bills for all landlords but particularly those who operated multiple properties through the site.

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“Since the start of pandemic we have had hundreds of former Airbnb property owners approach us about shifting from short to long term letting. They correctly predicted that nobody would be holidaying or travelling and therefore their incomes would dry up over the course of this year” explains Alexander.

“This investigation by HMRC into the income earned by these property owners between 2017-2018 and 2018-2019 means that many more landlords will feel that the short-term letting market is not for them. Indeed, there are some companies which had large numbers of properties hired through Airbnb and other sites which may now face considerable tax liabilities in the coming months” he adds.

Alexander says it’s easy to see the appeal of short-lets in financial terms, but he fears many landlords may have entered this market naively and without fully understanding the implications. 

“There are higher rents for short term lets but also greater obligations and costs in terms of managing property. Greater cleaning and maintenance costs, higher insurance premiums, and the expectation that more damage is likely to be caused by a short-term tenant than someone who wants to establish a home in your property. All of these factors alongside potential high tax bills will have put many landlords off remaining in the market” he says.

 

Apropos says that with the pandemic continuing for the foreseeable future it anticipates that a short-let-to-longer-let trend will become more pronounced in the coming months as more property owners see their incomes shrink. 

“This, coupled with potential tax demands before Christmas, is likely to see further large tranches of property released on to the long-term letting market as owners seek to recover some of their losses from the first part of the year” Alexander concludes.

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    Tax Airbnb and other tax dodgers to pay something towards furlough costs.

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    • 13 October 2020 10:31 AM

    The short-term letting market will just gravitate to lodger sites.
    HMRC is unable to detect how many adverts result in successful lodgers.

    The sites themselves don't know as no transactions occur on the site.

    I guess the only way to prevent the lodger sites being used for this is to specify minimum 1 week lodger agreement.

    But if course nothing to prevent the live-in LL and lodger agreeing to terminate early!!

    How would the HO and HMRC ever be able to check that LL have carried out RTR checks etc?
    A live-in LL doesn't have to be in residence while short-term occupants are there.
    To qualify for the RFRA in your home you only need to be there 1 day in a tax year to sign in the lodger.
    Though for resi insurance purposes 1 day a month is required or you have to advise the insurer.

    The demand for short-term occupation will return; it just won't be via AirBnB.
    Other platforms where HMRC can't detect occupation will be used.

    It won't be long before the word goes around that lodger websites offer the same service as AirBnB but can't be detected

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    I have paid tax from day one ! on my BTL properties.
    I am a good landlord and look after my tenants,yet this government treat me like a criminal ! with high taxes and numerous requirements,that single out Landlords,but leaving none Landlords who own their own homes alone.Yes energy ratings and electrical inspections are just as important to them too !
    Then of course the government expecting Landlords to house people for FREE ! if the fail to pay rent.
    Government are morons.

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    • 13 October 2020 10:52 AM

    Yep think about this if you occupy a 4 bed residential property you may have 3 other unrelated individuals renting as LODGERS.
    No licensing required unless in an Additional Licensing area.
    No need to do anything to what would be a normal house.
    As fewer than 5 no HMO Mandatory Licence.
    Able to achieve tax free £7500 of lodger income.

    Of course no live-in LL would ever receive more than £7500 annually in lodger income!
    If they did how would anyone find out as lodger LL would only accept cash rents!!?

    It makes far more business sense if possible to have multiple resi homes and have lodgers.
    Nobody can find out how many lodgers occupy a residential property.
    Obviously keep to no more than 4.
    Charge each say £600 fully inclusive.
    Far better than BTL.
    Easy to say of course as few can afford multiple resi homes especially if resi mortgages are needed.
    But if a LL can afford multiple resi mortgages then far more effective having lodgers than tenants.
    Lodgers can be removed very quickly from what is a home of the LL.

    So rent defaulting lodgers will be gone.
    No tenant rights for them.
    Being a lodger LL is far more viable than BTL as you can get rid of rent defaulters very quickly.
    No S24 etc etc

    Many LL could sell off multiple BTL properties reducing to two or three resi homes.

    But to achieve this there has to be a lot of equity in the BTL properties plus the LL will need a decent job to achieve multiple resi mortgages.

    I'm not sure whether resi lenders will even allow a borrower more than one resi mortgage even if they can ostensibly afford it.

    Lenders have become overly cautious recently.

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    Hello Mr. Kaye,
    I am sure you have been aware that the many self proclaimed do-gooder politicians and pub(l)ic (sorry mis-type) employees are arrogant, complacent and full of themselves, living in the past and assuming either that the state infinite resources or that they have an infernal right to spend others' money. This is only for the landlords, but not for the finance sector where almost anything and everything crooked and bent is ignored! I agree fully with you in the imbalance of over-regulation of the PRS, because of a few rogue LLs. Also the clean money accountability is only for the flipping locals and not for the overseas who bring money into UK, because many of the politicians who depart/retire from this area go find a good home in some foreign migrant national's empire, e.g. a recent Finance minister from the blue party sat as an editor of a London evening newspaper. he is the joker who brought in the 3% extra stamp duty for BTLs, to curb LL buying more. The private school education has not been much use in his ability to think clearly, just a knee jerk action.

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    maybe a letting agent can help you all to navigate the pitfalls ?

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