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Tax Areas | Personal Tax |

The implications of renting property short-term and through online accommodation booking sites


Online and short-term lettings

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Property owners using online websites for lettings are being pursued by Revenue to ensure earnings are declared and correctly classified for tax purposes.

Of particular concern is a growing trend by Revenue to treat short-term lettings as trades. This gives justification to Revenue to pursue owners not only for income tax but for VAT. Liability to VAT is based on 9% of the value of lettings made.

In 99% of cases, the operator is exposed to VAT, interest and penalties without the possibility of any recovery from the tenant.

This has not stopped the Revenue Commissioners from pursing operators letting property on 'AirBnB' and other online platforms, even where the activity has ceased.

A letting is generally carried on where a landlord and tenant arrangement exists.

This generally occurs when the tenant is entitled to exclusive possession of the premises for a defined period in exchange for the payment of rent.

In a landlord and tenant arrangement, the tenant would have certain statutory protections under the Landlord and Tenants Acts, the Residential Tenancies Acts and the Housing(Standards for Rented Houses) Regulations.

Typicaly, income will be treated as rental income, and therefore exempt from VAT, where the occupation is governed by a landlord and tenant arrangement.

The person in temporary occupation of a room in a hotel, guesthouse or bed and breakfast simply has use of the property as a guest.

The owner continues to have the right to access the property to provide services such as cleaning, changing of bed linen and the provision of meals.

Other similar examples include sharing a property with the owner, occuption of a property for short-stays, and booking self-catering holiday accommodation for short periods.

Legally these arrangements are licences. The activity is not therefore a letting, which has tax consequences for the operator.

By far, the most imporatant distinction between a letting and a licence is the application of VAT.

Where the activity carried on is deemed to be a licence, the operator is required to register and account for VAT where turnover exceeds €37,500 in any 12 month period.

The main impact of this treatment has been the pursuit by the Revenue Commissioners of individuals with AirBnB and similar properties. Where income has been declared, this has often been on the basis of 'rental' treatment.

The Revenue Commissioners have collected significant income tax and VAT settlements from AirBnB operators (and similar). This particularly difficult for owners who have little recouse to recover the VAT imposition.

If you are approached by Revenue you should do the following:-

  1. Resist the temptation to contact Revenue and instead read our recommendations for dealing with a Revenue audit.
  2. Establish if your activity is a landlord/tenant type activity (which would protect from VAT exposure).
  3. Calculate your total earnings to include additional amounts charged such as clearning to assess if the earnings exceed €37,500 in any 12 month period.
  4. Download/obtain a record of all letting information - which has most likely been shared by the online provider with Revenue.
  5. Contact us immediately so that we can advise on how best to mitigate your exposure.

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