Airbnb Users ― The New Reluctant Landlords?

By Eoin Tobin

Background ― “Rent-A-Room” Relief

In our March 2015 Tax Bulletin we highlighted the fact that Revenue had recently updated their guidance in relation to “rent-a-room” relief. Income arising to an individual in respect of the letting, for residential purposes, of a room or rooms in his/her home, including income arising from the provision of meals or other services supplied in connection with the letting, can be exempt from tax provided certain conditions are satisfied. With effect from 1 January 2015 the amount of such income an individual can receive tax free under the “rent a room” scheme increased from €10,000 to €12,000 per annum.

Revenue, earlier this year, updated their guidance to provide that income from the provision of accommodation to occasional visitors for short periods, including for example where the accommodation is provided through online accommodation booking sites, did not qualify for rent a room relief as, in such a scenario, the visitors use the accommodation as guest accommodation rather than for residential purposes. At that time it seemed clear that this general pronouncement was in fact aimed at seeking to exclude from the relief income an individual may receive from making their property available through the increasingly popular www.airbnb.ie website.

Airbnb

Reports in the media have now confirmed this to be the case with Airbnb seemingly contacting their Irish users over the weekend to advise them that the company, as a result of moving its headquarters to Ireland, has been obliged to share certain information with Revenue.

According to these reports, in an email sent to users, Airbnb said that it would be providing Revenue with information on all rental income earned by Irish hosts in connection with both foreign and Irish property as well as the rental income earned by non-Irish resident hosts who own Irish properties, including the check in date of the property’s first reservation and amounts paid out from 1 May 2014 to 31 December 2014. This information will become an ongoing part of the company’s annual corporate filing obligation in Ireland. The reports go on to highlight the additional tax liabilities, chargeable at a rate of up to 52%, which users of www.airbnb.ie may now face.

Tax Issues

Users with rental income in 2014 will have to pay and file no later than 31 October 2015 (unless the extended deadline for electronic filing applies) to avoid the imposition of interest and penalties. In fact such individuals should have included this income in their preliminary tax computations for 2014. Revenue, in response to the media reports, has highlighted the significant advantages to taxpayers in approaching Revenue early with regard to regularising matters and it may be, in certain cases, that a voluntary disclosure may make sense, particularly if the income goes back a number of years. The other disadvantage to making a property available on www.airbnb.ie is that on a future sale of the property capital gains tax may be payable on the sale proceeds due to principal private residence relief not being available either in whole or in part. On this point it has been reported that a spokesperson for Revenue has said that Airbnb hosts will not be liable for capital gains tax, on a principal private residence, unless they are exclusively using a room in their house for Airbnb.

Conclusion

The Airbnb story is indicative of the new ways in which Revenue is collecting information in relation to taxpayers’ affairs. As people do more and more business online they need to be aware of the digital footprint which they are leaving and the increasing chance that this information will be accessible to more and more interested parties.

Contact

For further information, please contact our tax team:

― John Cuddigan at john.cuddigan@rdj.ie or +353 21 4802701

― Eoin Tobin at eoin.tobin@rdj.ie or +353 21 4802741

― Mark Barrett at mark.barrett@rdj.ie or +353 21 4802739

― Mark Ludlow at mark.ludlow@rdj.ie or +353 21 4802730