AirBnB operating costs for tax offset

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

    AirBnB operating costs for tax offset

    you may have read my other post asking what is classed as gross income but this post is different as i am asking what kind of operating costs should i be considering when offsetting against tax

    of course most of it is proportional based on the number of days the property is unavailable to us as our main home - my list so far

    Full reimbursement of

    AirBnB fees
    Co host fees - which includes cleaning, washing, ironing and admin
    cost of alternative accommodation while main home is unavailable - inc travel cost to/from the accommodation at 45p/per mile (within the UK of course and within a reasonable distance)
    cost of gardening for each visit
    accountancy fees
    electrical safety checks

    Pro rata reimbursement of

    electricity
    water
    council tax
    mortgage interest
    home and contents insurance
    internet and line rental - which would be the service provided to the guest as opposed to what i would use for the letting
    tv licence fee


    grey areas

    meals while away from home - less the amount it would cost us to cook and eat at home - if we were in our motorhome then this cost would be negligible but would include gas/electricity on site and also internet etc - pro rata use of mobile signals etc
    office space at home - which would be using the arbitrary amount allowed for renting - i am thinking of £1 per month (on top of what i currently claim for our rental properties.


    can anyone who does AirBnB in their own home ONLY add any more please? or anyone else for that matter that sees something i missed, however trivial (ps we dont have a gas supply)


    The more i look at this subject, especially if you start to factor in items such as additional/replacement bedding, crockery etc and general maintenance and then items that need replacing in the long run, the more it appears to me that the £7500 undeclared income level has been set as it seems to reflect a cost neutral base of operating a small scale AirBnB in your own home
    In fact on the level we would potentially run at, its not too difficult to run at a loss .....



    #2
    You can't claim the costs of living somewhere else (or travel to and from there) as those aren't business expenses.
    Same with meals.

    I'd also suspect that the TV licence fee would fail the wholly and exclusively test, as you have to buy one even if you only watch TV once in the year.
    And the minimum you can buy is one year's worth.

    Your home and contents insurance are likely to be different for this purpose, so you can probably charge the additional cost, again, the actual insurances aren't wholly and exclusively for the business.

    You need to check that what you're proposing doesn't breach your mortgage terms (it would mine). And I don't think you can allow the interest in this kind of letting - again, it's not wholly and exclusively for the business.

    You can't claim for office space while the property is being let and I wouldn't bother generally as the amount is so low.

    The £7500 is an arbitrary amount, but it's aimed at renting a room in someone's home, not what you're planning, which is essentially a holiday let business.
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

    Comment


      #3
      thanks for the comments, but they do seem to be at odds with guidance on the revenue website, it states i can let all or part of my house, if i let all of it then i cant possibly reside there at the same time can i? so being away from there is surely an 'additional burden' that reduces my profit. so why shouldnt that be an allowable expense?

      as for accomodation expenses, if i went to visit a property i owned 250 miles away, would that qualify as a legitimate expense? as i understand even going looking at one to buy so long as the journey is wholly and exclusively for that would be classed as neccessary expenditure wouldnt it? i agree re the meals bit, but if i didnt have accommodation (motorhome) would need to rent accommodation that allowed me to prepare food or eat out -

      i have checked with both my mortgage provider and home insurance. both have agree in writing that so long as i dont exceed 90 days (which i dont even intend getting close to) within a calendar year, then they have no objections

      i think proportioned costs would be allowable - ie if electricity and council tax can be apportioned as 365/number of days let, why would you say mortgage interest wouldnnt be. i am not asking for the whole amount just the amount that would be used by guests ONLY ie, if let for 20 days, then i would apportion 20 out of the 365 days cost. the 20 days would be wholly and exclusively for the guest surely?

      your point re claiming for office space is strange one as if i can claim for 'home office use' for running our property rental then why cant i add a little bit extra for airbnb costs, £1 per month sdoesnt seem unreasonable to me.

      are you aware of the hm revenue guidance published on the internet - it says i can let part or all of my house and sitll use the rent a room scheme.
      The Rent a Room Scheme

      The Rent a Room Scheme lets you earn up to a threshold of £7,500 per year tax-free from letting out furnished accommodation in your home. This is halved if you share the income with your partner or someone else.

      You can let out as much of your home as you want.
      How it works

      The tax exemption is automatic if you earn less than £7,500. This means you do not need to do anything.

      If you earn more than this you must complete a tax return.

      You can then opt into the scheme and claim your tax-free allowance. You do this on your tax return.

      You can choose not to opt into the scheme and instead record your income and expenses on the property pages of your tax return.


      of course if i do qualify under the sceme, then all this discussion on what is allowable is a moot point but healthy if only to understand it all !!



      thanks for your comments, it really is useful to consider someone else's opinions and thoughts and to test my opinions and thoughts against them.

      i do intend consulting hm revenue when i have considered all my options to ensure i would not be evading tax !

      Comment


        #4
        Originally posted by MisterB View Post
        thanks for the comments, but they do seem to be at odds with guidance on the revenue website, it states i can let all or part of my house, if i let all of it then i cant possibly reside there at the same time can i? so being away from there is surely an 'additional burden' that reduces my profit. so why shouldnt that be an allowable expense?
        Because for an expense to be allowable against income it has to be solely and exclusively for the business.
        And your personal accommodation expenses fail that test.

        as for accomodation expenses, if i went to visit a property i owned 250 miles away, would that qualify as a legitimate expense? as i understand even going looking at one to buy so long as the journey is wholly and exclusively for that would be classed as neccessary expenditure wouldnt it?
        Visiting a property you owned would be OK, but you have to do nothing else significant during the journey - so you couldn't do the weekly shop on the way back, because then it fails the wholly and exclusive test.

        i agree re the meals bit, but if i didnt have accommodation (motorhome) would need to rent accommodation that allowed me to prepare food or eat out -
        You'd expect to have to buy food to eat, all that's happened (in tax terms) is that you're eating it somewhere else than normal.
        The food isn't really anything to do with your business.

        i think proportioned costs would be allowable - ie if electricity and council tax can be apportioned as 365/number of days let, why would you say mortgage interest wouldnnt be. i am not asking for the whole amount just the amount that would be used by guests ONLY ie, if let for 20 days, then i would apportion 20 out of the 365 days cost. the 20 days would be wholly and exclusively for the guest surely?
        Because the interest is not connected to the business in this case, it's how you have chosen to fund your home.
        Electricity and council tax are apportionable, the interest isn't.
        You might find an accountant who doesn't agree.

        your point re claiming for office space is strange one as if i can claim for 'home office use' for running our property rental then why cant i add a little bit extra for airbnb costs, £1 per month sdoesnt seem unreasonable to me.
        Fair enough.

        are you aware of the hm revenue guidance published on the internet - it says i can let part or all of my house and still use the rent a room scheme.
        Yes I am.

        thanks for your comments, it really is useful to consider someone else's opinions and thoughts and to test my opinions and thoughts against them.
        Comments offered in that same spirit.

        I do intend consulting hm revenue when i have considered all my options to ensure i would not be evading tax !
        Other great posters on here don't agree, but I don't ever consider asking HMRC for advice on tax (other than practical stuff like which box to put something in or where to send something).
        The people you can talk to aren't often that knowledgeable, they aren't tax advisors and aren't a disinterested opinion.
        Find a decent accountant and discuss this kind of stuff with them.

        Oddly enough, the consensus seems to be that your accountant's charges are business expenses when they're clearly not.
        But HMRC have never seemed to challenged that position.
        When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
        Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

        Comment


          #5
          great answers, not the ones i wanted to hear but i really appreciate you taking the time to respond

          i have just got off the phone and the rent a room scheme (although it states tyou can rent out as much or as little as you want - doesnt actually include letting the whole house out AND me not occcupying part of it - staying in a caravan in the garden could be construed as bringing it within the scheme BUT facilities (toilet etc would have to be - i do find that bit bizarre because we would share the drainage system (septic tank) just not the way we put stuff in it LOL

          anyway i got the answer i didnt want, but which perhaps i expected, so now i am back to working out what would and wouldnt constitute business expense.

          as you pointed out, the provision of accommodation appears not to be an allowable expense nor meals - i do think however that most of the other items can be apportioned to reduce our tax liability

          i havent given up hope just yet, but the odds do seem to be stacked against me (very highlyl LOL)

          best wishes and thanks again !

          Comment


            #6
            I think you're going to struggle.
            The property isn't going to be let long enough to be a holiday letting business, and it's not property investment, so I don't really see how you're going to end up with any kind of a "business" to have expenses that are allowable.

            I think you're simply going to end up with additional windfall income, but no actual "business" which is the activity and structure that allows you to offset expenses for tax purposes.
            Letting people stay in your home for money for (much) less than 90 days per annum doesn't create a "business".
            When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
            Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

            Comment


              #7
              i asked the HM revenue and told them i had other properties i let out, so should i just include it all as income and deal with it as one, claiming all expenditure allowances as i usually would, which of course means i now need to identify appropriate expenditure (travel and accom isnt one of them LOL - (Catch 22 - cant run the airbnb while we are 'in occupation' as its being let out as a whole house specifically for wedding parties - yet cant claim against the cost of providing accommodation elsewhere, even though we need to stay somewhere!)

              as for the 'less than 90 days' its often a requirement of local authorities that airbnb's cannot be operated for more than 90 days - if a property fails to let even though it is available - why should the expenses that do accrue not be tax deductable?

              i will be trying to find an accountant who deals specifically with airbnb properties for their advice

              Comment


                #8
                Originally posted by MisterB View Post
                as for the 'less than 90 days' its often a requirement of local authorities that airbnb's cannot be operated for more than 90 days - if a property fails to let even though it is available - why should the expenses that do accrue not be tax deductable?
                You can't really just decide that an activity is part of your existing business so you can claim expenses aa allowances against income.
                It's a common error, people "putting things through the business" when they're nothing to do with the actual business.

                If I run people to the airport a couple of times a year and they pay me, I can't just decide I'm a taxi business and claim expenses for the days I'm driving people around.

                To qualify as a holiday letting business your property has to be let for 110 days in a tax year, the 90 day rule is a local authority attempt to stop people using AirBnB - by stopping them running it as a business.

                You might get away with it, because HMRC are over stretched and it's hardly likely to produce a tax return that looks too suspicious, but it would be interesting to hear what a real accountant says.
                When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                Comment


                  #9
                  Originally posted by jpkeates View Post
                  You'd expect to have to buy food to eat, all that's happened (in tax terms) is that you're eating it somewhere else than normal.
                  The food isn't really anything to do with your business.
                  Not read the whole thread but I don't think that bit is correct.

                  https://www.gov.uk/tax-relief-for-em...night-expenses

                  travelling to a temporary place of work.

                  You can claim tax relief for money you’ve spent on things like:
                  • public transport costs
                  • hotel accommodation if you have to stay overnight
                  • food and drink
                  If you have a quick search, plenty of accountancy firms spell it out a lot more clearly but I didn't want to post advertising links.

                  Comment


                    #10
                    Originally posted by jpkeates View Post
                    To qualify as a holiday letting business your property has to be let for 110 days in a tax year
                    So what happens if it's let out for only 109 days a year? Is there no tax to pay?

                    Comment


                      #11
                      Originally posted by boletus View Post
                      So what happens if it's let out for only 109 days a year? Is there no tax to pay?
                      The reverse.
                      You receive income, but you're not trading as a business.
                      When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                      Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                      Comment


                        #12
                        Originally posted by boletus View Post
                        Not read the whole thread but I don't think that bit is correct.
                        ...
                        If you have a quick search, plenty of accountancy firms spell it out a lot more clearly but I didn't want to post advertising links.
                        If you have to travel for business is one thing, but if you rent out your home, any alternative accommodation isn't a business expense, it's a personal expense.

                        In, essentially, the same way that the cost of your own home and food isn't a business expense, although it's probably something that contributes to you being able to work in the first place.
                        When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                        Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                        Comment


                          #13
                          Originally posted by jpkeates View Post
                          The reverse.
                          You receive income, but you're not trading as a business.
                          So I can let my home out for £1000 a week for 10 weeks a year and not pay any income tax?

                          (I used to do this pre covid and just declared it like it was BTL income.)

                          Comment


                            #14
                            [QUOTE=boletus;n1168192So I can let my home out for £1000 a week for 10 weeks a year and not pay any income tax?[/QUOTE]
                            No, it's the reverse.
                            You have to declare the income, but, unless you're operating as a business, you can't claim the associated costs as expenses.

                            If it's part of your letting business (which it probably isn't) the business rules apply.
                            You can have a part time job - which is fine, but you don't seem to be able to have a part time holiday letting business.
                            When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                            Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                            Comment


                              #15
                              and yet more confusion - from the 2018 budget

                              Shared occupancy test for rent-a-room relief – Following consultation on draft legislation, to maintain the simplicity of the system the government will not include legislation for the ‘shared occupancy test’ in Finance Bill 2018-19. The government will retain the existing qualifying test of letting in a main or only residence, and will work with stakeholders to ensure that the rules around the relief are clearly understood.


                              and an article from the FT Advisor

                              https://www.ftadviser.com/property/2...ccupancy-test/

                              there is also an article on Money Market Expert


                              so back to square 1 i think in this game of snakes and ladders - anyone have a view on this?

                              i cant find anywhere within the on line guidance that i must be present - which sort of ties in with my thoughts that you cant let your whole house and still be present during the letting period?


                              Comment

                              Latest Activity

                              Collapse

                              • Reply to Advice
                                by SouthernDave
                                I started my limited company a year before buying the first property, then bought a second 2 months later, a third 3 months after that, a fourth 5 months after that and so on to where I am now. Our lenders have never said they want a separate company per property. Ive never heard of that, if it were...
                                23-01-2022, 17:40 PM
                              • Advice
                                by jhoggard
                                Hi,

                                I currently have a property rented out in my own name with a fair bit of equity around 50% LTV this is actually a repayment mortgage which i'm looking to switchover to a interest only. When i do this i'm also taking money out of the property to put towards another which i'm looking...
                                20-01-2022, 14:25 PM
                              • Reply to Advice
                                by jpkeates
                                I don't think we disagree.

                                The OP has one property and is looking to buy a second.
                                At that point in that business, lenders will want a company per property.

                                There's a point where that ceases to be the case, when the portfolio gets big enough, or, presumably when someone...
                                23-01-2022, 17:34 PM
                              • Reply to Advice
                                by SouthernDave
                                i concur with this, once you get over 4 properties, they consider you to be a portfolio landlord and want to start seeing cashflow forecasts before lending to make sure the company is buoyant. Directors guarantees each time but no limits on number of properties or number of dofferent lenders....
                                23-01-2022, 16:50 PM
                              • Reply to Advice
                                by JamesHopeful
                                This is not true in my experience. I currently have eight properties in the same company, across a number of different mainstream BTL lenders, and none of them have batted an eyelid at the number.

                                Where I have known lenders worry about the company is it doesn't have the correct SIC code...
                                23-01-2022, 16:28 PM
                              • Reply to Advice
                                by theartfullodger
                                Depends to a great degree on tax regulations over the coming years. We only know what the rules are today, not what they'll be in future e.g. when you retire

                                I expect chancellors to cut back on the advantages of people owning property through companies (well, wouldn't you if you were chancellor)...
                                22-01-2022, 13:06 PM
                              • Reply to Advice
                                by Gordon999
                                1. No. You have not sold the property yet

                                2. 19% on profit by company.

                                3. Seek advice from accountant.
                                22-01-2022, 09:36 AM
                              • haring inherited property
                                by halfax
                                i am inheriting a property and would like to place half in my grandsons name.
                                as anyone done similar?...
                                19-01-2022, 18:12 PM
                              • Reply to haring inherited property
                                by halfax
                                thanks for help to everyone who replied, great forum
                                21-01-2022, 18:55 PM
                              • Reply to Looking for tax / financial advice for a BTL /holiday let long-held portfolio
                                by ifallelsefails
                                I watched a webinar from Landlord studio and this man Tony Gimple was featured in it. Have a look at his Linkedin profile:
                                https://www.linkedin.com/in/tonygimp...alSubdomain=uk
                                He has a website whereby he consults exactly to your situation:
                                https://www.bel.gb.net/
                                ...
                                21-01-2022, 17:13 PM
                              Working...
                              X