HMRC has recently launched a renewed investigation into Airbnb hosts, with the site compelled to share earnings data to assist in uncovering any unpaid tax.

However, the rules concerning tax on income from holiday-let properties can be confusing, so there is a risk that some property owners might have failed to disclose earnings either inadvertently or deliberately.  

The consequences of failing to declare earnings for tax purposes can be serious – ranging from a relatively minor fine to criminal prosecution. So, what can holiday-let owners do to ensure they are paying the correct tax, and what help is available if they find out they are not? 

Any money earned on a holiday-let property is generally considered to be taxable income that may vary based on individual circumstances. To ensure that owners are calculating and paying the appropriate amount of tax, they should seek professional advice. This will enable them to catch any potential errors before they turn into larger problems.  

If a holiday-let owner finds out that they have not been paying the appropriate amount of tax, help is available.

The Government launched the Let Property Campaign (LPC) over a decade ago to provide holiday-let owners and landlords with a pathway to disclose any unpaid tax on residential properties and resolve matters as quickly as possible. This tried and tested system is likely to be the primary disclosure facility for any Airbnb hosts who have been contacted by HMRC recently, and it is regarded as a positive way to correct mistakes or omissions. 

Should a property owner discover that they have not paid enough tax, they can send an online notification to HMRC of their intention to make a disclosure using the LPC. Once they have been accepted into the LPC, the owner or landlord then has a 90-day period in which to calculate their tax, as well as any interest or penalties that might be due.  

It is advisable to seek support from a tax professional in this instance to ensure no further mistakes are made.

For example, depending on the nature of the “tax offence” that has been disclosed – i.e., whether an error has been made in a return that has already been filed, or whether no tax returns have yet been filed for a property – the tax investigation could go back a number of years. In some cases, it has the potential to go back 20 years, and owners and landlords should ensure that their records are in order, to ensure the 90-day submission window is met. 

In the majority of cases, any mistakes or errors that arise are due to misunderstandings around complex tax rules, and the LPC enables holiday-let owners to correct these errors in a non-antagonistic environment.

It is always best that owners take a proactive approach to examining their income from holiday-let properties and disclose mistakes in good time.  

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 to their finances, or they could soon find themselves in a difficult situation, potentially resulting in a time-consuming and stressful investigation into their tax affairs. 

An enquiry may well bring downsides to the owner or landlord such as a loss of control, higher financial penalties and the risk that other aspects of their tax liability may become subject to investigation – regardless as to whether other issues have been flagged.  

As with most things, the best defence is proactivity, and holiday-let owners who voluntarily disclose any errors will find correcting them a smoother, less stressful process. By seeking independent advice where appropriate, owners of holiday-lets can be assured that they are doing the right thing and mitigating the risk of further tax demands in the future. 

* Matthew Watkins is tax disputes and disclosures director at accountancy firm Menzies LLP *