Airbnb may lead to capital gains tax

By | Category: Travel news
panoramic view of the Lake District

the Lake District – where a house without these views can earn £3,000 pw in summer

On Thursday, Lady Gardner of Parkes asked the government whether it planned to introduce restrictions on the short-term letting of residential flats for holiday purposes.

Quite obviously this continues the concern about the impact or Airbnb, the arguments for which were discussed here earlier by Adrian and Kaye.

Replying for the government, Lord Bourne of Aberystwyth said there were no plans to introduce “a blanket ban but not only did he point out that London boroughs can apply for consent for short-term restrictions he also welcomed Airbnb’s decision to amend its system so that all home listings in London are not available for more than 90 nights in any given year without appropriate planning permission.

It is apparent from this answer that the government probably would have been concerned if Airbnb had not amended its rules.

Lady Gardner pointed out that seven London boroughs have called for legislation on this issue because, she claimed, many Airbnb lettings were in long term residential buildings, exactly the type which has been forbidden in New York but the government answer was still the same – it is up to local authorities to take the initiative if it is felt a need exists.

It isn’t only in London that the impact of Airbnb is being felt. Lord Clark of Windermere raised the problem of the Lake District where in the height of summer, a house without views can still command £3,000 per week. The concern of many is why would a landlord rent property to a local at a much smaller rental income when that landlord could make a lot more by renting via Airbnb. Rumours exists that some people are making six figure sums per year but they pay no business rates (like hotels) and probably are not paying the correct amount of tax on their earnings.   It was only then that the minister revealed that he was meeting Airbnb again to discuss concerns.

Lord Beecham raised the point that landlords or householders could be liable for capital gains tax when they sell the property concerned if it has been used for commercial purposes. Presumably anyone who lets their home for cash, is liable to capital gains tax. How would you work out what tax was owing? You would have to calculate what percentage of the total building was let out and for how long, based on the number of days calculated as a percentage of the number of days a person had owned the building or had a tenancy agreement. That will keep the Inland Revenue people busy for a while?

One answer is that you swap your home for another so that no income was earnt. You still get your holiday but no income. But under that model Airbnb wouldn’t have a business as they rely on commission.

It is pretty obvious that governments around the world, not just the UK one, are trying to adjust traditional and long-established tax systems to an entirely new type of business- that of a sharing economy. It has potentially turned anyone into an entrepreneur and their home into a source of income.

I cannot imagine we have heard the last of the great Airbnb debate yet?

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