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AirBnB Megathread - ALL A&P related Airbnb discussion here please
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Kylee Millions Badminton wrote: »This stance could be open to being challenged in court though if a person wanted to just because revenue say it doesn't mean its correct. That would be decided by a court.
Now obviously no normal person is going to go down that route so you have no choice but to pay tax on the airbnb income. I do think its unfair though, I dont see why someone renting a room in their home (which they are living in) on airbnb should not be able to avail of the rent at a room scheme and I think if challenged in court there would be a good chance that a judge would find in favour of it being under the rent a room scheme. Obviously full houses/apartments let on airbnb is totally different.
Actually people challenge Revenue all the time. It is not that difficult or expensive like you seem to think so. It is not a court, but rather a hearing.
How is it unfair? Rent-a-room scheme was designed to allow OAPs and people with the odd room in their house to rent it out long term and declare the income. If people were renting out for short term periods, you were a B&B and expect to pay your income taxes like a B&B. Renting your rooms out for one or two nights here and there is exactly like a B&B. Why shouldnt it be taxed like a B&B?
Why do you think a judge would allow it? Rent-a-room was never intended to cover short term lets and I dont just because you think its "unfair" has no merit on this.0 -
The whole purpose of rent a room was to provide residential accommodation as alternative to someone sharing or renting whole house. It's there to support the rental sector. It's not there as a mechanism to shield a bnb business from trading income tax.0
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newacc2015 wrote: »Actually people challenge Revenue all the time. It is not that difficult or expensive like you seem to think so. It is not a court, but rather a hearing.
How is it unfair? Rent-a-room scheme was designed to allow OAPs and people with the odd room in their house to rent it out long term and declare the income. If people were renting out for short term periods, you were a B&B and expect to pay your income taxes like a B&B. Renting your rooms out for one or two nights here and there is exactly like a B&B. Why shouldnt it be taxed like a B&B?
Why do you think a judge would allow it? Rent-a-room was never intended to cover short term lets and I dont just because you think its "unfair" has no merit on this.
Is the issue not a point of law so outside the appeals commissioner?
The Revenue are saying the law said short term let which is Case I eg residential is someone living in the premises (with ties to the place or community ) so excludes the person 'staying' for a short time.0 -
At the end of the day I dont think Airbnbers are going to win a battle with Revenue. Youve also got to consider here that Airbnb is a letting business, just like a hotel or registered B&B. Why should hotels and B&Bs get hit with tax when others providing short term accomodation dont? Hotels and B&Bs are the competition so Im doubting Revenue are going to allow favourable treatment over legitimate tax paying businesses.0
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At the end of the day I dont think Airbnbers are going to win a battle with Revenue. Youve also got to consider here that Airbnb is a letting business, just like a hotel or registered B&B. Why should hotels and B&Bs get hit with tax when others providing short term accomodation dont? Hotels and B&Bs are the competition so Im doubting Revenue are going to allow favourable treatment over legitimate tax paying businesses.
I agree that the Revenue will not give favourable treatment to the Airbnbers over legitimate tax paying businesses of the same Case income. The basic conflict is that being a Landlord is not regarded as a 'business' the way a b&b or hotel is a trade\business. The relief is given to a home occupying Landlords but what else do they get or loose by moving from case I to V.
Turning the argument to the b&b owner occupiers are Case I but can elect to be Case V because they only book using Airbnb, now they may not get the relief, but which case leaves them with less tax and what about capital gains tax on the property any advantage there? If the b&b is not a trade will the non-tax b&b legislation apply?
I can't see an upside for the Revenue to change the treatment on day or week stays however they may need a cut off point for when the trader becomes a landlord.0 -
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newacc2015 wrote: »Actually people challenge Revenue all the time. It is not that difficult or expensive like you seem to think so. It is not a court, but rather a hearing.
How is it unfair? Rent-a-room scheme was designed to allow OAPs and people with the odd room in their house to rent it out long term and declare the income. If people were renting out for short term periods, you were a B&B and expect to pay your income taxes like a B&B. Renting your rooms out for one or two nights here and there is exactly like a B&B. Why shouldnt it be taxed like a B&B?
Why do you think a judge would allow it? Rent-a-room was never intended to cover short term lets and I dont just because you think its "unfair" has no merit on this.
If you are renting a room in your house that you are living in it should be tax exempt imo regardless of the duration of the let.
At the end of the day an airbnber should be telling every customer to contact them directly if they or their friends ever want stay there again to "save on paper work".0 -
Kylee Millions Badminton wrote: »If you are renting a room in your house that you are living in it should be tax exempt imo regardless of the duration of the let.
Why? Do you not see the distinction between using the room for the Air BnB short term letting and renting a room out to a lodger on a medium to long term arrangement which the rent a room scheme was intended to cover.0 -
Kylee Millions Badminton wrote: »If you are renting a room in your house that you are living in it should be tax exempt imo regardless of the duration of the let.
Should this also apply to people who run b&b's?0 -
Are'nt Bean a Ti's in the Gaeltacht also allowed income from their 'students', tax free up to €12K.
Those are 4 week lets. I wouldn't be one to challenge Revenue but it doesn't look as cut and dried as they would have everyone believe.0 -
Water John wrote: »Are'nt Bean a Ti's in the Gaeltacht also allowed income from their 'students', tax free up to €12K.
Those are 4 week lets. I wouldn't be one to challenge Revenue but it doesn't look as cut and dried as they would have everyone believe.
The Gaeltacht income tax filings would pre-date the rent a room, do you know if it was (is) Case V and if there are any specific provision for this?0 -
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Wouldn't know the Revenue codes. Could be wrong, but was it an O'Cuiv political stroke?0
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We'll see - politics often trumps economics. I doubt that the amount of taxes collected from AirBnB or similar lets is so great that exempting it as Rent-A-Room Scheme income would make a huge dent in the public finances. The government has 1 billion to play around with in terms of tax cuts and spending increases in the forthcoming budget. If the total cost of allowing income from short-term/holiday lets is relatively low, it could well make the change - a cheap but popular move. Also the Revenue is likely to be aware that many people with income from short-term/holiday lets aren't on AirBnB and aren't declaring that income at all. Getting them to declare their income as Rent-A-Room Scheme income probably won't increase tax revenue greatly (it's unlikely that many people will earn over the RAR Scheme limit), but it will mean that they and their premises are registered with the Revenue, making it easier for Revenue to check up on them in the future. I'm sure Revenue would prefer people to register under the Rent-A-Room Scheme and still not be liable for tax than to not register and to evade tax.Peregrinus wrote: »
Two thoughts:I suspect a change in legislation will come in the next finance act (be it a favourable one or unfavourable one).
If the legislation is amended to define residential accommodation , it will define it in a way that excludes short-term tourist lets. That s what the Revenue think the legislation already means, and the purpose of the amendment would be to clarify the legislation, not change its effect. Plus, the policy considerations which underlay the introduction of the rent-a-room scheme suggest that this would be the appropriate definition.
On the other hand, a government which isn't the most popular might think there's a few votes in allowing short-term and holiday lets to be treated as exempt Rent-A-Room Scheme income.
But, in fact, I don t expect there will be an amendment. To make an amendment to clarify the legislation is to concede that the legislation is unclear, and the official position is that it s perfectly clear, what is this ambiguity of which you speak? If you were to amend the legislation for 2017-18 and future years, you d be encouraging challenges to assessments issued for 2016-17 and previous years, and you don t want to do anything to encourage challenges.
I don't see how a change in the law could encourage a challenge. If the law in 2016 is that income from short-term and holiday lets is not Rent-A-Room Scheme income, then it's the law in 2016. A change in the future status of that income wouldn't permit someone to challenge the tax treatment of their 2016 short-term/holiday let income by itself.
If the law in 2016 was that a particular stretch of road had a speed limit of 50 km/h, changing the law so that the speed limit from 2017 onwards is 60 km/h isn't going to permit anyone who got a speeding fine in 2016 for driving at 55 km/h to challenge that fine.
If more than a few people do challenge assessments and the challenges are successful or are expected to be successful, then you might see an amendment being brought forward. Otherwise I suspect not.0 -
If it was definitively intended to cover medium to long term arrangements it would say so explicitly in the legislation. Revenue are not competent to make domestic law. Only the Oireachtas and/or the Courts can do that. Revenue are entitled to their opinion but it's only an opinion. Only the Courts can interpret the legislation as it stands now and only the Oireachtas can amend the legislation or repeal it.relax carry on wrote: »Kylee Millions Badminton wrote: »If you are renting a room in your house that you are living in it should be tax exempt imo regardless of the duration of the let.
Why? Do you not see the distinction between using the room for the Air BnB short term letting and renting a room out to a lodger on a medium to long term arrangement which the rent a room scheme was intended to cover.0 -
Hi all, I have just been to visit a friend who has set up with AirB&B. He lives up in the Wicklow mountains, and he finds it brilliant, and a very useful income stream. He is also enjoying meeting a lot of very diverse people.
This whole taxation argument that the thread has descended into doesn't apply, as he is self employed anyway, so the rent monies are listed in the accounts he has to prepare each year regardless.
I have a tiny little cottage that has been unoccupied for a decade, and am seriously tempted to modernize it and put it up on the website, have any on here done so??
Its not attached to our house, but is a listed building.
Would a nice solid fuel stove be sufficient, or would central heating be a definite necessity?
It was built around 1832, and currently has an old Wellstood cooker, but it will need removing as it smokes and is not suitable.
It will need to be re-plumbed and re-wired anyway, so now would be the time to put in heating. Internally, its about 14 foot square, divided into three rooms.0 -
I don’t think the issue is the tax cost of applying the rent-a-room exemption to tourist lets; it’s the question of why there’s a rent-a-room exemption at all. What is the policy here? What is the purpose of the legislation?sondagefaux wrote: »We'll see - politics often trumps economics. I doubt that the amount of taxes collected from AirBnB or similar lets is so great that exempting it as Rent-A-Room Scheme income would make a huge dent in the public finances . . .
If the policy behind the legislation is to allow the hard-pressed middle-income taxpayer to finance the purchase of his house by taking in paying guests then, logically, the relief should apply to any income he gets from taking people in, whether they stay for two nights or two years.
On the other hand, if the policy is to help people finance house purchase, wouldn’t that policy be more effectively implemented by just, say, extending mortgage interest relief? And what would be the rationale for giving the rent-a-room exemption to people who already own their houses outright, free of mortgage? Or to people who aren’t buying houses, but merely subletting rooms in rented houses? So it doesn’t look to me as if the purpose of this legislation is to benefit householders or house purchasers.
The alternative explanation is that the policy is there for the benefit of the tenants - to increase the supply of rented/rentable accommodation, and so reduce upward pressure on rents. And that looks like a much more rational account of the relief - it explains why you can get it for a sublet, or for a house that you have already bought.
We can also look at what was said when the rent-a-room relief was introduced (in 2001). That confirms that the purpose of the measure was to improve the housing supply. In the debates at the time, the Minister for Finance (then Charley McCreevy) said:
“Sections 29 and 30 deal with measures to help ease our current housing pressures. There are many homes where the possibility exists of spare accommodation being rented out. A barrier is often the fact that such rental income is taxable. Section 29 introduces a new “rent a room” scheme.”
If that is the underlying policy then, if there is to be a change in the law here, it won’t be to clarify that the relief is available for tourist lets; it will be to clarify that it isn’t. Right now, if you have a room to rent out, there are tax incentives to rent it to someone looking for a home, rather than someone looking for tourist accommodation. If the relief was introduced to make it easier to rent homes, the last thing you would want to do is to remove the tax incentive that favours letting as a home over letting as tourist accommodation.
Mmm. Or, if it were definitely intended to cover short-term tourist lets, it would say so explicitly in the legislation. I think you can run that argument either way.sondagefaux wrote: »If it was definitively intended to cover medium to long term arrangements it would say so explicitly in the legislation.
Sure. The Revenue don’t get to make the law, or even to interpret it authoritatively. But they do have to apply it, and that requires them to take a stance on what it means. And they have taken a stance, and published it, so that taxpayers can (a) arrange their affairs with knowledge of the tax consequences, and (b) object to the Revenue stance and challenge it in the courts, if so minded.sondagefaux wrote: »Revenue are not competent to make domestic law. Only the Oireachtas and/or the Courts can do that. Revenue are entitled to their opinion but it's only an opinion. Only the Courts can interpret the legislation as it stands now and only the Oireachtas can amend the legislation or repeal it.
There is also option (c), which is to lobby for a change in the legislation. But if the policy considerations are as I have surmised above, that won’t be easily achieved.0 -
Hi guys, newbie here, so please forgive errors
I'm travelling home from NZ to Dublin with my family (we're a Mum & Dad, 4 kids aged 6-12 - Mum's a Dubliner )
We are trying to find a house to rent for about a month mid June to mid July 2017, without paying an arm and a leg!
I was hoping to find something on AirB&B but for the up to 30 nights, the cost is a killer.
Looking at house sitting/home swap websites etc there are so many sites, membership fees etc. its mind boggling - does anyone have any suggestions of how I might find a short term house which sleeps the family (even 2 beds is fine, we can bunk up for a short period!)
I was hoping to put feelers out for house sitting or paying some money is fine, just maybe not a limb!
We are dairy farmers in NZ and hare experienced with animals, as well I own a cleaning company, so we are quite useful house sitters I would hope!
Any suggestions or leads much appreciated!
Thanks guys...0 -
QUOTE=Paceyfamily;101048245]Hi guys, newbie here, so please forgive errors
I'm travelling home from NZ to Dublin with my family (we're a Mum & Dad, 4 kids aged 6-12 - Mum's a Dubliner )
We are trying to find a house to rent for about a month mid June to mid July 2017, without paying an arm and a leg!
I was hoping to find something on AirB&B but for the up to 30 nights, the cost is a killer.
Looking at house sitting/home swap websites etc there are so many sites, membership fees etc. its mind boggling - does anyone have any suggestions of how I might find a short term house which sleeps the family (even 2 beds is fine, we can bunk up for a short period!)
I was hoping to put feelers out for house sitting or paying some money is fine, just maybe not a limb!
We are dairy farmers in NZ and hare experienced with animals, as well I own a cleaning company, so we are quite useful house sitters I would hope!
Any suggestions or leads much appreciated!
Thanks guys...[/QUOTE]
Post in the "Farming" forum here, and see what happens.
With milk prices on the floor, someone will take pity (for a price
)
http://www.boards.ie/vbulletin/forumdisplay.php?f=8450 -
And if they're not? I don't see anything in the Charlie McCreevy quote which proves that the Rent-A-Room Scheme was intended for medium- or long-term letting arrangements. As I said earlier, Revenue don't get to make the law, they can only give their opinion on what it means. The courts have the power to decide what the current legislation means and the Oireachtas has the power to amend it or repeal it.Peregrinus wrote: »
I don t think the issue is the tax cost of applying the rent-a-room exemption to tourist lets; it s the question of why there s a rent-a-room exemption at all. What is the policy here? What is the purpose of the legislation?sondagefaux wrote: »We'll see - politics often trumps economics. I doubt that the amount of taxes collected from AirBnB or similar lets is so great that exempting it as Rent-A-Room Scheme income would make a huge dent in the public finances . . .
If the policy behind the legislation is to allow the hard-pressed middle-income taxpayer to finance the purchase of his house by taking in paying guests then, logically, the relief should apply to any income he gets from taking people in, whether they stay for two nights or two years.
On the other hand, if the policy is to help people finance house purchase, wouldn t that policy be more effectively implemented by just, say, extending mortgage interest relief? And what would be the rationale for giving the rent-a-room exemption to people who already own their houses outright, free of mortgage? Or to people who aren t buying houses, but merely subletting rooms in rented houses? So it doesn t look to me as if the purpose of this legislation is to benefit householders or house purchasers.
The alternative explanation is that the policy is there for the benefit of the tenants - to increase the supply of rented/rentable accommodation, and so reduce upward pressure on rents. And that looks like a much more rational account of the relief - it explains why you can get it for a sublet, or for a house that you have already bought.
We can also look at what was said when the rent-a-room relief was introduced (in 2001). That confirms that the purpose of the measure was to improve the housing supply. In the debates at the time, the Minister for Finance (then Charley McCreevy) said:
Sections 29 and 30 deal with measures to help ease our current housing pressures. There are many homes where the possibility exists of spare accommodation being rented out. A barrier is often the fact that such rental income is taxable. Section 29 introduces a new rent a room scheme.
If that is the underlying policy then, if there is to be a change in the law here, it won t be to clarify that the relief is available for tourist lets; it will be to clarify that it isn t. Right now, if you have a room to rent out, there are tax incentives to rent it to someone looking for a home, rather than someone looking for tourist accommodation. If the relief was introduced to make it easier to rent homes, the last thing you would want to do is to remove the tax incentive that favours letting as a home over letting as tourist accommodation.
Mmm. Or, if it were definitely intended to cover short-term tourist lets, it would say so explicitly in the legislation. I think you can run that argument either way.sondagefaux wrote: »If it was definitively intended to cover medium to long term arrangements it would say so explicitly in the legislation.
Sure. The Revenue don t get to make the law, or even to interpret it authoritatively. But they do have to apply it, and that requires them to take a stance on what it means. And they have taken a stance, and published it, so that taxpayers can (a) arrange their affairs with knowledge of the tax consequences, and (b) object to the Revenue stance and challenge it in the courts, if so minded.sondagefaux wrote: »Revenue are not competent to make domestic law. Only the Oireachtas and/or the Courts can do that. Revenue are entitled to their opinion but it's only an opinion. Only the Courts can interpret the legislation as it stands now and only the Oireachtas can amend the legislation or repeal it.
There is also option (c), which is to lobby for a change in the legislation. But if the policy considerations are as I have surmised above, that won t be easily achieved.0 -
I agree most of all that. I'm just making the additional point that the Revenue not only may give their opinion on what the legislation means; they must do that, in order to do their job, which is actually to operate the legislation.sondagefaux wrote: »And if they're not? I don't see anything in the Charlie McCreevy quote which proves that the Rent-A-Room Scheme was intended for medium- or long-term letting arrangements. As I said earlier, Revenue don't get to make the law, they can only give their opinion on what it means. The courts have the power to decide what the current legislation means and the Oireachtas has the power to amend it or repeal it.
And if you find their opinion disadvantageous to you and think their opinion is wrong, for the reason you yourself point out you need to take the matter to court (which you do by appealing against your tax assessment). Only in a court can you get an authoritative interpretation of the law.
If you don't want to go down the court route, the alternative is to try and get the Oireachtas to amend the law to make it clear that short-term lets are covered. But if the original policy behind the law was, as McCreevy said, to "ease current housing pressures" by creating an incentive for people to offer rooms in their homes as housing for others, then changing the law so that people can access the same incentive by offering tourist accommodation will only happen if there's a change in policy.
Promoting or incentivising the provision of tourist accommodation does nothing to ease current housing pressures. It stands to reason that every room let out to short-stay tourists is a room not available to someone looking for a home. Hence, if the policy is to maximise the number of rooms offered to people looking for a home, you don't want the tax relief to be extended to AirBnB cases. Hence, you'll only make this change if in fact the policy has changed.0 -
I found a Pre-Budget Submission from Airbnb dated Sep 2015 on oireachtas.ie and below is are extracts I am using to guesstimate my numbers.
Airbnb Start
Pre-Budget Submission from Airbnb Ireland: Embracing the Sharing Economy
Presented to Minister for Finance, Michael Noonan TD
Based on information provided during Dáil Debates, we understand that the cost to the Exchequer of rent-a-room relief for 2012 was estimated at €6 million.
In 2014, Irish hosts earned a total of €13.4 million from listings on Airbnb. On average, about €3,600 of rental income was earned through Airbnb per Irish host during 2014, on a total of 3,652 listings.
If it is assumed for illustrative purposes that deductible rental expenses are in the region of 30% of rental income, then average rental profits per host should be €2,565.
Using the standard rate of income tax of 20%, the potential income tax arising on those net rental profits would be €513 per host. Therefore, based on 2014 figures and using 62% as an estimate of the proportion of the total Airbnb earnings paid to Irish hosts who might potentially qualify for relief, the estimated cost to the Exchequer of relief claims by Irish Airbnb hosts is approximately €1.16 million.
PriceWaterhouseCoopers has identified a number of “megatrends” that are changing the way we live and work. The emergence of the so-called “sharing economy” is one of them. Their analysis suggests that global revenues of c. €13bn will balloon to c. €295bn by the year 2020.
Airbnb end
Ok I am taking their report as is (20% rate) and ignoring that the proportional tax rate across the population needs to be adjusted so the 2014 cost would have been higher. Projecting forward using Airbnb figures leaves a minimum cost of 26million by 2020 (€1.16 million by growth rate / €13bn * €295bn = 26million)
I would agree that the Revenue have to take a position to incorporate the new income stream into the tax base and that the tax loss\cost is not going to make any politician spin a change on the tax take alone.
Note in the document that Airbnb focus on the benefit the visitor has to the wider economy. Also note Airbnb are discussing it as visitor (temporary) accommodation, with RAR now being used for short term lets.
Now note "using 62% as an estimate of the proportion of the total Airbnb earnings paid to Irish hosts who might potentially qualify for relief", so a minimum of 2,264 Airbnbers tax filing per year (3,652* 62%) leaves the Revenue having to issue guidance.
And Airbnbers are seeking to :
removing the word “residential” from the existing definition of “relevant sums” within Section 216A of the Taxes Consolidation Act 1997 (“TCA 97”), as follows:
““relevant sums” means all sums arising in respect of the use for the purposes of residential accommodation, of a room or rooms in a qualifying residence and includes sums arising in respect of meals.....”
To resolve expression of doubt Revenue look at the law as written and they have appal decisions as well as test cases. One of the areas that will cover is the 'resident, ordinarily resident, domiciled'.
I would argue the "residential" supports that the intent to provide 'homes' not visitor places.This whole taxation argument that the thread has descended into doesn't apply, as he is self employed anyway, so the rent monies are listed in the accounts he has to prepare each year regardless.
You will both have to prepare accounts as you both will have a number of different income streams ( PAYE, Case I, Case V ) and costs with different rules eg tools of the trade in this instance is the room\cottage.I have a tiny little cottage that has been unoccupied for a decade, and am seriously tempted to modernize it and put it up on the website, have any on here done so?.
My answer to the question: No.
Consider that as the cottage is self-contained unit so RAR would not apply.
If you are running a purpose build 'hotel' business the cost of doing the conversion can be taken into account and there are tax breaks etc you can get under various tax law plus funding you can investigate, landlord income may not get the same treatment.
Plus ignoring getting the planning, do you need additional work done to comply with building regs. Eg as a landlord each room needs a heating appliance.0 -
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Peregrinus wrote: »I don’t think the issue is the tax cost of applying the rent-a-room exemption to tourist lets; it’s the question of why there’s a rent-a-room exemption at all. What is the policy here? What is the purpose of the legislation?
.
It can be argued what the original purpose of the legislation is but at the end of the day tax was or is never going to be paid on rooms rented in the owners home anyway. Its all cash in hand, even with the relief in place I would say most people don't make the tax return on it and instead just keep it all off the books.
So at the end of the day its better off to just have the exemption in place rather than not having it and still getting no extra tax income.0 -
Kylee Millions Badminton wrote: »It can be argued what the original purpose of the legislation is but at the end of the day tax was or is never going to be paid on rooms rented in the owners home anyway. Its all cash in hand, even with the relief in place I would say most people don't make the tax return on it and instead just keep it all off the books.
So at the end of the day its better off to just have the exemption in place rather than not having it and still getting no extra tax income.
You are making a lot of assumptions. Explain to me why when failing to file a tax return is a criminal offence and opens you up to massive fines, that someone would not take the 2 mins on PAYE anytime to declare the additional income that they dont have to pay tax on?
Exemption is irrelevant if you are failing to fill a tax return. You just dont seem to get that
This is 2016. With all the technology that Revenue now has, it is very easy to see if someone is under-declaring their income.0 -
newacc2015 wrote: »You are making a lot of assumptions. Explain to me why when failing to file a tax return is a criminal offence and opens you up to massive fines, that someone would not take the 2 mins on PAYE anytime to declare the additional income that they dont have to pay tax on?
Exemption is irrelevant if you are failing to fill a tax return. You just dont seem to get that
This is 2016. With all the technology that Revenue now has, it is very easy to see if someone is under-declaring their income.
Because I know of a number people doing rent a room and they deal only in cash and don't bother making a return (some didn't know you had to in fairness but still didn't when told). What technology is going to find out someone is getting an extra few hundred quid a month in cash for renting a room once its not lodged? We aren't taking about a drug dealer making a 100k a week in cash and buying a new range rover or even a LL renting a full property where there is a big paper trail, tenants with rights, RTB registration, two mortgages etc etc.
The point of the above though is more directed at the fact that removing the exemption would be pointless from a revenue generation point of view as leaving aside if a return is being made on rent a room or not the fact is if the relief didn't exist then there would definitely be no return made. I would imagine this is even one of the reasons for introducing the relief so people could just be above board and still not pay tax.0 -
Maybe this line of discussion can get more contributions from those in the know if continued in the taxation forum?0
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athtrasna wrote:Maybe this line of discussion can get more contributions from those in the know if continued in the taxation forum?
Pretty sure they don't look kindly on posts about noncompliance...0 -
Grolschevik wrote: »Pretty sure they don't look kindly on posts about noncompliance...
Well its not really a post about or advocating non compliance so its a pity if it can't be discussed somewhere as I think its a very valid point that removal of rent a room relief would have minimal to zero impact in revenue generation from taxation. I think its very much property related so I would prefer it stays here as this is a busier forum with a more varied poster so a better discussion can be had and more perspectives.0 -
Kylee Millions Badminton wrote: »Well its not really a post about or advocating non compliance so its a pity if it can't be discussed somewhere as I think its a very valid point that removal of rent a room relief would have minimal to zero impact in revenue generation from taxation. I think its very much property related so I would prefer it stays here as this is a busier forum with a more varied poster so a better discussion can be had and more perspectives.
This thread is about Airbnb though and is being derailed by the focus on the history and purpose of the rent a room scheme0 -
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On the location I think that the discussion is more a side track than a derailment due to the merging of threads and that tax is an important consideration so perhaps amending the title a little to reflect that its not just about hosting would be better? Anyway mods can delete this post if you think it a further derailment.
On topic business, tax and banking:
Airbnbing and renting a room are business decisions, the individual would like to buy something they can't afford 'a better lifestyle', be that a good meal and a bottle of wine at the weekend or a nicer home. Some Airbnbers will let a room, some will let a whole property and they will all have to 'comply' with laws that they may not have considered. I came up with the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010.
Bare with me as I wander the scenic route.Kylee Millions Badminton wrote: »
Because I know of a number people doing rent a room and they deal only in cash and don't bother making a return (some didn't know you had to in fairness but still didn't when told). What technology is going to find out someone is getting an extra few hundred quid a month in cash for renting a room once its not lodged? We aren't taking about a drug dealer making a 100k a week in cash and buying a new range rover or even a LL renting a full property where there is a big paper trail, tenants with rights, RTB registration, two mortgages etc etc.newacc2015 wrote: »You are making a lot of assumptions. Explain to me why when failing to file a tax return is a criminal offence and opens you up to massive fines, that someone would not take the 2 mins on PAYE anytime to declare the additional income that they dont have to pay tax on?
Exemption is irrelevant if you are failing to fill a tax return. You just dont seem to get that
This is 2016. With all the technology that Revenue now has, it is very easy to see if someone is under-declaring their income.
The point of the above though is more directed at the fact that removing the exemption would be pointless from a revenue generation point of view as leaving aside if a return is being made on rent a room or not the fact is if the relief didn't exist then there would definitely be no return made. I would imagine this is even one of the reasons for introducing the relief so people could just be above board and still not pay tax.
So this got me thinking about technology and building a better mousetrap, ie I believe that Wallmart were the first big retailer to data mine but that Target was first to spot a pregnancy. So what data have Revenue got on an individual and if they can extrapolate using what they have? And who else had data and how its used? So tax compliance led to access to banking and lending facilities.
Revenue
Once the individual becomes an Airbnber, they become a taxpayer, and correctly organised they will factor tax into their calculations. But they have a choice to be a tax avoider or tax evader, it's a business decision, a better lifestyle now against potentially large cashflow later.
Revenue and Social Welfare exchange data so 'legal' income data is collected. From the media the Revenue have 50+ (Edit Airbnb = 51) sources of official data collection. (I am assuming its not including the neighbour who reports you due to you or your guest upsetting them).
So PPS number,
Name and name changes on marriage,
Date of birth,
Gender,
Addresses lived at. (including change of address notice to any connected government department holding your PPS no)
< these link us to other people eg parents, sibling, partner, children, 'randomer' we lived with.
Employment history and income (start /end, employer, declared income, tax credits, social welfare, tax payable).
Stamp duty for house purchase
Mortgage Interest relief
Inheritance and tax payable
PPS linked financial and savings accounts products (including first time buyers DIRT tax break)
< this gives the Revenue baseline data, (also links us to more people), this plus the other data can be used to determine socioeconomic ranking status.
< the socioeconomic data allows Revenue to do an 'affordability' test.
From a business point of view they use software REAP* (Risk Evaluation, Analysis and Profiling) to figure out where they will earn the most tax take. Revenue audit a small percentage of the population each year selection is either targeted (estimated 95%) or random. From this they can gather outgoings and can apply guesstimate lifestyle costs across a population.
*please note the choice of acronym.
< I accept that its easier to track someone with a lower disposable income when grossing up that few hundred a month. I remember speaking to an accountant who dealt with detecting suspected theft from a business (pre-tec), his recommendation on indicators were nice cars and holidays in youth and nice houses in maturity.
I would imagine this is even one of the reasons for introducing the relief so people could just be above board and still not pay tax.
From a business point of view understanding the motivation behind the business decision can be key. It's not good business to give a 'way free money' but it's not great to chase small tax take using fixed resources and Revenue can not been seen to turn a blind eye to revenue compliance.
Remember when RAR was introduced politicians and the banks were telling everyone buying a house to add room rent on to their income to qualify for a higher mortgage. It's bad public policy for the Government to advocate for tax evasion, but bad politics to prosecute the 'little guy' looking to buy their home. So what about the banks and how we avail of banking and lending facilities.
Banks:
Airbnbers are paid via a bank account and for non-self employed this will probably be a non-business account.
Under the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 banks have a legal obligation to prevent, detect and report money laundering (AML) and have most of the person specific information (income and outgoings) that Revenue have to build a socioeconomic ranking status. They may not know exactly where the money is coming from, but have the outflows (car, holiday and house) and have lifestyle costs across a population.
For a Airbnber who choses to become a tax evader (< a criminal act), and are paid via a bank transfer, they will by default be money laundering, the bank has a clear AML obligation here.
From a business point of view one of the uses of banking software is to comply with their AML obligation in order to avoid fines and bad publicity. They run 100% of the transactions to detect unusual items, outliers and changes through the system and flag them. The bank has no obligation to confirm an individuals tax status but has to investigate and report to Revenue. (< see the cost saving for Revenue here).
So you look for (re)finance, a mortgage, etc. The bank now takes a close look at your personal bank account\finances because you asked them to. They do an affordability test, and most people will supply additional information on the application form eg accounts from the self employes or revenue confirmation on income from the PAYE worker, origins of other bank deposit amounts and of course Airbnb income. The bank now know that the Revenue regard Airbnb income as taxable, so they are obliged to look at this income stream and confirm your tax status.
Then in order to 'prevent and detect' they apply a test across all non-business customer accounts. In the Uk there appears to be a growing trend where banks flag even a single transaction (legitimate) and freezes the bank account. At that stage the bank can't explain why or what they are doing, and the customer won't have access to money. It may take them a couple of weeks to contact the customer and ask for additional information ie tax clearance, and still no access to the money.
If you can't prove you are not money laundering they have to report to the Garda and Revenue. (< I honestly have no idea what banking process would happen next to allow the bank to give you back your money, I am assuming its Revenue driven/file and pay the tax).
As for the account or a credit line (loan etc) in a banks perspective, potential tax evaders are a bad business risk as similar to gamblers there is the potential that they won't have the money to repay their loans. Even if you are filing, and can\do supply whatever is requested you are still in breach of contract by running a business through a non-business account, and this is ongoing loss of revenue for the bank. So in general terms, you are still a bad business risk (breach of contract), the bank have a cost to continue to monitor and investigate flagged items (<high cost human intervention) so while they may offer a business account it may be more cost effective to stop doing business with you the customer.
Now I know that some of this is a bit simplistic and some times the 'lucky mouse' gets away and that intentional tax evaders will find ways around the system (Q. what's the one banking transaction a cash rich person won't need?). But IMO its a thing to factor into the business decision(< open a business account), we are moving into a cashless society and the technology is getting better, so we risk unintentionally ending up locked out or with limited access to banking and credit.
.....Anyway mind the gap and have a nice brunch.0
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