Bumper year for holiday lets… and for the taxman

2020 and 2021 may have been challenging for most of us, but for owners of UK holiday lets it has been a bumper time, with demand exceeding supply in many holiday destinations. Happy days for holidaymakers and for the owners, but there’s a price to be paid for everything and owners will face investigations by HMRC if they fail to properly report their earnings from Britain’s record staycation boom of the last two years.

UHY Hacker Young, analysing data from the HMRC Let Property Campaign, reports that the Let Property Campaign is an opportunity open to all residential property landlords with undisclosed taxes. This includes:

• those that have multiple properties
• landlords with single rentals
• specialist landlords with student or workforce rentals
• holiday lettings
• renting out a room in your main home for more than the Rent a Room Scheme threshold
• those who live abroad or intend to live abroad for more than 6 months and rent out a property in the UK, as you may still be liable to UK taxes.

HMRC has the power to request information or documents from third parties such as holiday booking sites “for the purpose of checking the taxpayer’s tax position”. Airbnb has previously agreed to share information on income earned by its UK hosts as part of a 2020 tax settlement with HM Treasury and the company also agreed to pay an extra £1.8 million in tax and share data on hosts’ incomes with HMRC.

HMRC also says that this campaign will be ongoing for some time and landlords intending to come forward who delay, risk higher penalties if they are subject to an enquiry and they have not already notified an intention to disclose.

If the errors were due to misunderstanding the rules or deliberately avoiding paying the right amount it is better to come to HMRC and admit any inaccuracies rather than wait until HMRC uncovers those errors.

Over the next few months, ahead of the January 31, 2022 deadline, owners of holiday flats and cottages will be filing their self-assessment tax returns that cover the first year of the Covid-staycation boom. Many will be tempted to under report the windfall earnings they have made in that period.

Covid-related travel restrictions have persuaded a far larger number of Brits than usual to book a ‘staycation’ this summer. This led to a boom for UK holiday lets and brought a significant number of newcomers into the market. 

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Prices have surged for holiday lets, with increases of 35% from last year seen in some tourism hotspots. Summer 2021 was predicted to see a 51% rise in domestic tourism spending to £51.4bn, but some sites have seen bookings increase by up to 300%.

“HMRC will be checking tax returns from people who have let property for a jump in declared income to reflect the staycation boom. Their algorithms will fairly easily identify those holiday homeowners who they think are under-declaring income.”

“As HMRC’s Let Property Campaign targeting buy-to-let landlords shows, the Treasury sees landlords as an obvious target for tax investigations and extra tax revenue.”

“Landlords are recommended to make sure they are aware of their tax obligations before spending their summer ‘staycation’ windfall.”

“Landlords who fail to declare unpaid taxes are ultimately risking fines and criminal prosecution.”

https://www.gov.uk/government/publications/let-property-campaign-your-guide-to-making-a-disclosure