Owners of UK holiday lets could face investigation by HMRC if they fail to report their earnings for tax purposes, according to UHY Hacker Young.
With massive restrictions on foreign travel because of the pandemic, the UK has seen a surge in tourism since March 2020.
According to Which?, prices have surged for UK holiday lets, with increases of 35% from 2020 seen in some tourism hotspots. And Visit Britain’s figures show that Summer 2021 was predicted to see a 51% rise in domestic tourism spending, to £51.4bn.
HMRC has power to request information from holiday letting sites
Neela Chauhan, a UHY Hacker Young partner based in London, points out that 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”. This includes entire databases of popular holiday booking sites.
Airbnb has previously agreed to share information on income earned by its UK hosts as part of a 2020 tax settlement with HM Treasury. As part of the deal, the company agreed to pay an extra £1.8 million in tax and share data on hosts’ incomes with HMRC.
Taxman fears under-reporting on holiday lets
Ahead of the 31 January 2022 deadline, owners of holiday flats and cottages will be filing self-assessment tax returns that cover the first year of the Covid-staycation boom. Chauhan said that HMRC is concerned that many will be tempted to under-report the earnings they have made in that period.
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%.
Chauhan said: “With the boom in staycations driven by the pandemic, leading to a bumper season for UK holiday lets, it’s likely HMRC will come for their slice of the pie.
Landlords need to be made aware of tax obligations
“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.
“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.”