Revenue Investigations for Airbnb Hosts

The Irish revenue have begun issuing notice of investigations to Airbnb hosts with Irish listings. This comes as no surprise since Airbnb announced back in 2015 that it would be sharing information with Revenue on its Irish listings under S880 and 890 TCA97.

Based on the information we’ve seen, revenue appear to be focusing on the tax years 2015 and 2016 however we know that Airbnb has provided revenue with host information as far back as 2014 and revenue have the powers to extend the scope of their investigation during their review.

A revenue investigation is no small matter and is considered the most serious type of revenue intervention. Unlike a more traditional revenue audit, once you receive notice of an investigation there is no option to make a voluntary disclosure. Consequently, taxpayers who have unreported Airbnb income and are selected for an investigation could be faced with tax liabilities at an effective rate of 80% when interest and penalties are added in addition to publication.

What to do next

The best approach is to get out in front of the investigation and file an income tax return now! If you haven’t been selected for investigation (yet), by filing your income tax return you are determining the liability as opposed to revenue telling you what they think the liability should be. Furthermore, the income tax return that you have prepared becomes the basis for any discussion as opposed to revenue determining the liability and leaving you in the position where you have to argue to the contrary.

Additionally, by filing your income tax return you’re also reducing the risk of a revenue investigation because your returns are now filed. Even though your tax return is late, and interest and a surcharge of 10% will apply, it will only be a margin of what the penalties will be should you be selected for an investigation.

How to reduce your tax liability

Deductible expenses

For income tax purposes you will be taxed on profits as opposed to income. When arriving at the profits assessable to tax, a deduction will be available for expenses which have been “wholly and exclusively” laid out or expended for the purposes of the trade. For example

  • Repairs and maintenance

  • Airbnb fees

  • Laundry costs

  • Cleaning

  • Insurance

  • Legal and Accounting fees

  • Advertising

Non-allowable expenses

  • Food

  • Travel

As a general rule food and travel are non allowable as tax deductible expenses in most circumstances.  

Pre-trading expenses

Pre-trading expenses incurred 3 years prior to commencement of hosting is deductible where the expenditure would have been deductible if it had been incurred after the business commenced. For example, the cost of repainting a bedroom or purchasing new bed linen in advance of the guest accommodation first being made available for use, would be deductible for tax purpose.

Unintended consequences

Some of the unintended consequences of being an Airbnb host could be

  • VAT @ 9% if your sales are more than €37,500

  • Loss of Principal Private Residence Relief (PPR) when you sell your home

 If you received notice of an investigation and would like to discuss in more detail, feel free to arrange a consultation with an accountant here