Airbnb landlords warned over tax liability
People using Airbnb to rent rooms to holidaymakers have been warned that the Revenue Commissioners could start trawling through properties available on the website to make sure tax is being paid.
About 4,500 properties in Ireland - from castles to caravans - are available to rent on Airbnb, the website that enables people to rent rooms and entire properties to travellers from around the world on a short-stay basis.
An Airbnb spokesman said that's more than double the number that were available on the service in Ireland last summer.
But Barry Flanagan, a tax consultant with Kerry-based Taxback.com, has warned that many providers of rental accommodation via Airbnb and similar sites could be liable for capital gains tax if they sell a principal private residence in the future that has been used to provide rented accommodation.
Mr Flanagan has also cautioned people to make sure they declare the rental income for tax purposes and to keep receipts so they can offset expenses related to the rental activity.
"We are advising people to keep a record and receipts of any expenses incurred through this activity," he said.
The Revenue Commissioners told the Irish Independent that as long as the provision of guest house accommodation was "occasional in nature", expenses such as the cost of providing meals, light, heat or laundering costs, would be allowed to be deducted in calculating the taxable profits.
A capital gains tax liability could also arise for people making all or part of their principal private residence available for rent via sites such as Airbnb.
The gains from the sale of a principal private residence are usually exempt from capital gains tax.
But the Revenue Commissioners said that if all or part of the property had been used for business purposes, including short-term rental accommodation prior to a sale, then a capital gains tax liability would arise on the portion of the property that was used for business purposes.
"If you are renting out rooms in your home as a B&B, then this is essentially a 'change of use' from residential to business purposes," said Mr Flanagan.
"The same would apply for conversion of a room to a surgery, if a doctor or dentist practised at home."
The Revenue Commissioners said that since 2013, it has had access to data from financial institutions related to credit and debit card transactions.
That has assisted it in identifying online traders. It has access to 50 data sources to ensure tax compliance.