Airbnb - Should I set up a Private Limited Company?

Yillan

As per title. I'm considering renting out my apartment on airbnb this summer, but I'll need to kit it out before I do anything like that, and as such I would like to identify certain purchases as business expenses and get tax relief. I'm not sure if people are actually paying tax on their airbnb income, but I'm not keen on an audit so I'd like to do it all above board.

To the end of writing this expenditure off as a business expense, would I need to set up a private limited company, or are there other options available? Would it be worth my while. Obviously my understanding of this stuff is limited. I don't even know the tax rate for a private limited company, and then if I wanted to turn my business income into my personal income would I then have to pay tax on it again?

I feel as if I should get out my Junior Cert business studies book

dearg lady

Yillan wrote: »

As per title. I'm considering renting out my apartment on airbnb this summer, but I'll need to kit it out before I do anything like that, and as such I would like to identify certain purchases as business expenses and get tax relief. I'm not sure if people are actually paying tax on their airbnb income, but I'm not keen on an audit so I'd like to do it all above board.

To the end of writing this expenditure off as a business expense, would I need to set up a private limited company, or are there other options available? Would it be worth my while. Obviously my understanding of this stuff is limited. I don't even know the tax rate for a private limited company, and then if I wanted to turn my business income into my personal income would I then have to pay tax on it again?

I feel as if I should get out my Junior Cert business studies book

Setting up a company is massively complicating the issue. From a tax perspective just declare your case v (rental) income. Go on revenue website for details on how/when/allowable expenses etc

smunchkins

There is no need to set up a company really. I've been doing Airbnb 3 years now, the first year I just kept all my receipts and employed an accountant to do my return for me. Since then I've done it myself. Most of it is taxed at 40% as I'm over the regular limit as I have a PAYE job too. I put in for capital expenses (which gets divided by 8, as that (8 years) is the expected life of large items) and direct running expenses like utilities and repairs.

Pawwed Rig

A limited company could be beneficial in certain circumstances such as you not needing the income being generated in the short term. I could give you 20 pros and cons but would need to carefully examine your personal situation first.

J.pilkington

Pawwed Rig wrote: »

A limited company could be beneficial in certain circumstances such as you not needing the income being generated in the short term. I could give you 20 pros and cons but would need to carefully examine your personal situation first.

A word of caution with your advice, Undistributed rental income(profit) is liable to an annual surcharge if it is not paid out within 18mths. Ie revenue will not let you build up rental income in a company and avoid the exit tax and will charge you circa 20% per annum until you pay it out (wage / dividend)

http://www.revenue.ie/en/tax/ct/close-companies.html

Pawwed Rig

J.pilkington wrote: »

A word of caution with your advice, Undistributed rental income(profit) is liable to an annual surcharge if it is not paid out within 18mths. Ie revenue will not let you build up rental income in a company and avoid the exit tax and will charge you circa 20% per annum until you pay it out (wage / dividend)

http://www.revenue.ie/en/tax/ct/close-companies.html

Note, I did not give advice. I just said I didn't have enough information to give advice and tbh in a situation like this it is not advice I would be giving away for free.
The surcharge is one issue alright but is not insurmountable depending on the facts of the case.

athtrasna

It's worth investing in proper advice from an accountant on this one, they can best advise on the Revenue implications. Their advice will also be tax deductible.

On another note, you mention that it's an apartment. Check your lease with the management company, it may preclude running a business from the apartment.

Mrs OBumble

Depending on what assets you have, there could also be legal reasons why a company structure would be preferred: Without if, if someone sued you, it's possible you could lose your own house.

Pawwed Rig

Mrs OBumble wrote: »

Depending on what assets you have, there could also be legal reasons why a company structure would be preferred: Without if, if someone sued you, it's possible you could lose your own house.

In addition a bank would not allow an asset be transferred to a limited company while they still had an interest in it. .

newacc2015

OP do you have a mortgage on the property? You can only use mortgage interest relief if the property is PRTB registered. Airbnb wont be PRTB registered.

You really need to go to an accountant to discuss this