# Rental Income - VAT



## Numbers (14 Apr 2016)

Where an individual rents out a number of properties for over €37,500 on short term basis via AIRBNB, are they then required to register for VAT and charge the 9% rate?


----------



## rob oyle (14 Apr 2016)

If it's an individual then it's income tax that will be payable on the rental income, unless  missing something? How would an individual register for VAT?


----------



## rob oyle (14 Apr 2016)

If it's an individual then it's income tax that will be payable on the rental income, unless  missing something? How would an individual register for VAT?


----------



## Numbers (14 Apr 2016)

rob oyle said:


> If it's an individual then it's income tax that will be payable on the rental income, unless  missing something? How would an individual register for VAT?


Sorry maybe I should have been clearer. The individual is renting these properties and then sub-letting them via AIRBNB so effectively they are operating as a property letting company I would imagine and therefore subject to VAT thresholds etc


----------



## jim (10 Jan 2017)

This is an interesting question. Unless its a company that is doing the subletting wouldn't the individual only be liable to income tax rather than VAT?


----------



## Setanta12 (10 Jan 2017)

Where an individual rents out a number of properties for over €37,500 on short term basis via AIRBNB, are they then required to register for VAT and charge the 9% rate.

Unsure if the €number is correct, but the rest is. On the same form you'll also be registering for income tax.


----------



## cremeegg (10 Jan 2017)

According to Ernst & Young advice to Airbnb, income from Airbnb is rental income. Rental income is not generally subject to VAT and the thresholds do not apply, so the answer to the question according to Ernst & Young on the Airbnb website is, no you do not have to register for VAT even if you exceed the threshold.

However in my view Ernst & Young are flat wrong, but hey I'm just an anonymous internet poster and they are a respected international professional services firm. They are still wrong though. Here is their opinion. http://assets.airbnb.com/eyguidance/ie_new.pdf

The question comes down to wether Airbnb income is taxable under Schedule D case I, as a trade and so subject to VAT if the threshold is reached, or if it is taxable under Schedule D case V rental income, and not subject to VAT, (except in certain less common circumstances which don't appear to be relevant to the OP).

Clearly E&Y are wrong, (yes I love saying it) and the advice you have gotten here free, i.e. VAT is applicable if you reach the threshold, is correct.


----------



## jim (10 Jan 2017)

Cremegg why are you adamant that E&Y are wrong in this instance?


----------



## cremeegg (10 Jan 2017)

jim said:


> Cremegg why are you adamant that E&Y are wrong in this instance?



The question comes down to, is Airbnb income taxed in the same way as a landlord receiving rent from a tenant, i.e. Case V rental income as E&Y believe, or is it taxed as a trade in the same way as a hotel or guest house under Case I. 

Commonsense suggests that it is a form of holiday accommodation and as such taxed as a trade.

E&Y even suggest that Airbnb hosts "may also need to register tenancies with the Residential Tenancies Board ". Whatever junior trainee wrote this garbage should be fired, just after the partner that signed it off. I would just love to know how much Airbnb paid for this advice.


----------



## jim (10 Jan 2017)

I see your argument but I disagree. Surely its just as easy for one to claim that income received through renting your spare room through airbnb should be treated the same as income received through renting your room not through airbnb?

For example, if I chose to rent my spare room outside of airbnb for 1 month (or even 3 months) at a time to different people should that be treated as a trade? And by extension if I rent a room for 2 years to 1 person and then to another person after that - is that a trade? Where do you draw the line in terms of tenure?

Shouldn't renting on airbnb and off airbnb not be treated the same way ie as casual non-trade income, which is what E&Y suggest? Why do you think they should be treated differently?


----------



## T McGibney (10 Jan 2017)

jim said:


> I see your argument but I disagree. Surely its just as easy for one to claim that income received through renting your spare room through airbnb should be treated the same as income received through renting your room not through airbnb?
> 
> For example, if I chose to rent my spare room outside of airbnb for 1 month (or even 3 months) at a time to different people should that be treated as a trade? And by extension if I rent a room for 2 years to 1 person and then to another person after that - is that a trade? Where do you draw the line in terms of tenure?
> 
> Shouldn't renting on airbnb and off airbnb not be treated the same way ie as casual non-trade income, which is what E&Y suggest? Why do you think they should be treated differently?



It's Revenue policy that short term Airbnb-type lettings normally form part of a trade. This is consistent with the general principles of income tax, including the Badges of Trade, but the tax treatment of individual cases may vary according to the circumstances of each. Here's my old blog post on the topic: https://mcgibney.ie/2015/08/11/dont-lose-sleep-over-airbnb-tax-returns/


----------



## cremeegg (10 Jan 2017)

T McGibney said:


> It's Revenue policy that short term Airbnb-type lettings normally form part of a trade.



Come on just one more step. Say it out loud. *E&Y got it wrong. *Doesn't that feel good.



jim said:


> Shouldn't renting on airbnb and off airbnb not be treated the same way ie as casual non-trade income, which is what E&Y suggest?



In general Airbnb is not renting, it is the provision of guest accommodation. Of course as T McGibney says "individual cases may vary according to the circumstances of each"


----------



## jim (10 Jan 2017)

I appreciate that is the Revenue's policy and aside from whatever E&Y think, how can one differentiate between these two scenarios:

a) short terms rentals through air bnb
b) short terms rentals to lodgers in the traditional sense (not through air bnb)

Are they not effectively the same thing? By the way I agree that it would probably constitute carrying on a trade I just don't see the difference in using airbnb versus not using it especially if the tenure is an equivalent length.


----------



## T McGibney (10 Jan 2017)

jim said:


> I appreciate that is the Revenue's policy and aside from whatever E&Y think, how can one differentiate between these two scenarios:
> 
> a) short terms rentals through air bnb
> b) short terms rentals to lodgers in the traditional sense (not through air bnb)
> ...



It is indeed exactly the same thing and there is no difference in treatment between short term rentals via Airbnb and otherwise.


----------



## jim (10 Jan 2017)

I might be mistaken here but if I rent my spare room for, say 3 months, and decide to switch tenants every 3 months - I wouldn't be treated as carrying on a trade and I wouldn't pay tax so long as its under the 14k threshold re rent a room relief. So why is Airbnb treated differently?

What's the definition of a short tem rental and how does revenue police this?


----------



## T McGibney (10 Jan 2017)

jim said:


> I might be mistaken here but if I rent my spare room for, say 3 months, and decide to switch tenants every 3 months - I wouldn't be treated as carrying on a trade and I wouldn't pay tax so long as its under the 14k threshold re rent a room relief. So why is Airbnb treated differently?



3 months isn't exactly short-term letting, in the common understanding of the concept.  If you're letting a room for 3 month stints it doesnt make financial sense to use Airbnb anyway.



jim said:


> What's the definition of a short tem rental and how does revenue police this?



You'll have to look that up yourself. My blog post above includes links to detailed Revenue guidance.


----------



## jim (10 Jan 2017)

Yes that is true!

I will read your blog - thanks. I'm still not sure though if there is a difference between renting through airbnb and renting in the traditional sense and therefore why they should be treated differently particularly if the length of the rental is the same. Take the following 2 scenarios:

a) Rent through airbnb - 12 times a year, 1 month length of tenure.
b) Rent in traditional way - 12 times a year to 12 different lodgers for 1 month each

Why would these scenarios be treated differently? I assume under scenario b) rent a room relief would be availed of and it wouldn't be looked upon as a trade. Why then should renting through the airbnb website in exactly the same manner be treated as a trade? Surely if one scenario is a trade then the other scenario is too.

So going back to the original question/debate - I am tending to agree with E&Y in that airbnb income should be treated as rental income particularly when you consider the length of the letting and if that length is the same as if letting in traditional way. Or to put it another way I am failing to understand what the logic is for differentiating between letting on airbnb versus letting in the traditional sense.

I think the question in all of this is: what exactly is the definition of a short term letting? Once that question is answered then it is possible to differentiate between it being a trade and not a trade. I don't think one can rely on a common sense understanding of what is short term, in order to answer this question, there must be a legal definition in the context of this question


----------



## T McGibney (10 Jan 2017)

Again you'll need to look it up for anything definitive, but my understanding is that if someone is paying to use a place as their home, ie living there and using it as a base, it counts as residential accommodation and income from such activity in the hands of the property owner is rental income. 

But if a number of people are successively living there on a more temporary basis, for example on holidays, the activity is more akin to a B&B or hotel and as such is taxed as a trade.


----------



## jim (10 Jan 2017)

In fairness that does make perfect sense to me and I agree with that theory. I just am not sure how the Revenue can police this i.e how can they prove that each of the 12 tenants intention was to stay there for a holiday. I would imagine the homeowner could claim that each of the 12 tenants were using it as their home - its all just a bit vague to me and therein lies the problem with this. There is no clear distinction, as I see it, and so both scenarios should be treated the same.


----------



## T McGibney (10 Jan 2017)

Revenue don't police anything. The tax system works via self-assessment and the burden falls on the taxpayer to justify the basis on which they complete their tax returns.  As I said earlier, the precise circumstances of each case will determine the appropriate treatment.


----------

