HMRC receives Airbnb letting data

Landlords should realise that HMRC will know about their lettings through Airbnb, so full disclosure of all their taxable property income is essential, including for all prior years.

The Airbnb UK accounts for the year to 31 December 2019 include a statement that the company will share data with HMRC about the earnings of hosts (those who let out property) on its UK platform in the years 2017/18 and 2018/19, Reuters reported.

This should not come as a surprise to tax advisers, as HMRC has been using its Connect data analysis system for years to scrape data concerning property income and gains from various sources.

Opening enquiries

The Airbnb data will allow HMRC to launch targeted enquiries into the tax affairs of individuals who have not declared their lettings income for 2017/18 and 2018/19.

The deadline for opening an enquiry into a self assessment return for 2018/19 is 31 January 2021, if the return was issued and submitted on time.

However, the discovery rules allow HMRC to go back much further, up to 20 years in some cases. The data provided by Airbnb will certainly constitute a discovery for HMRC’s purposes, so up to 20 years will be open for enquiry.

HMRC is reported as saying it will address any issues over the landlords’ payment of tax in 2021/22. This clearly indicates that HMRC expects to use its discovery powers to open up tax enquiries going back some years.

Guidance

All online platforms providers in the gig economy have come under pressure from tax authorities round the world to ensure that their customers pay tax on their earnings.

To help nudge their hosts in the right direction Airbnb provides a short note written by PwC on tax considerations for short term lettings on its website. This was last updated in January 2019, so it could do with a refurbishment.

The guidance note doesn’t advise landlords how to declare income from property in past tax years, or what to do in the case of a tax enquiry, neither does it mention capital gains tax.

What to declare

The Airbnb insight report for 2017/18 says the annual earnings from Airbnb by a typical UK host is £3,100, (£3,800 in Scotland). This lies within the room-a-room relief allowance of £7,500, so would not generate a tax reporting obligation for a host who only lets out part of their main home.

However, letting a second or third home that generates income in excess of £1,000 in a tax year will create a tax reporting obligation. The £1,000 limit is the trading and miscellaneous income annual allowance that can apply to letting income that doesn’t fall within rent-a-room relief.

How to declare

If the landlord hasn’t declared their rental income, and it is not covered by rent-a-room relief or the miscellaneous trading income allowance, this situation should be swiftly corrected.

Where the taxpayer has submitted a tax return, and it is still in date for amendment, it should be amended without delay. The 2018/19 tax return can be amended by the taxpayer until 31 January 2021.

Where the omitted property income or gain relates to earlier tax years the taxpayer should consider disclosing under HMRC’s let property campaign.

This disclosure service has been running for over seven years, but it is only open to individuals who let UK residential property. It can’t be used to declare income from non-residential property or where the property has been let through a company or trust. Where the let property is located overseas the worldwide disclosure facility should be used.

The advantage in using the let property campaign to disclose is that the penalties charged for non-disclosure will be much lower than if the taxpayer waits for HMRC to contact them. If full disclosure and payment of the tax is made before HMRC spots there is a problem, the penalty can be reduced to nil.

Need help? Do not hesitate to contact us on info@elsburys.co.uk or visit www.elsburys.co.uk

(article courtesy of Accounting Web)

Updated guidance on new furlough rules from July!

The government have released new information on the transition of furlough towards end of October. The following five stages are:
June
From 10 June the furlough scheme is effectively closed for employees who have not been previously furloughed. Until June 30 employers can claim for 80% of furloughed employees current salary, up to £2,500 but the employee must not work for the employer. Employer National Insurance Contributions and certain pension contributions can be claimed too. Employers are not required to contribute anything towards furloughed employees’ salaries for June.
July
The new flexible scheme applies only for previously furloughed employees. These people can now return to work part time, but employers can still claim the grant for normal hours not worked. Any amount of working time and any shift pattern can be agreed with the previously furloughed staff. Until July 31 employers can still claim for 80% of the furloughed employees’ current salary, up to £2,500 as well as employer National Insurance Contributions and pension contributions. This only applies for the hours the employee does not work. Employers must pay employees for the hours they work.
August
The main change is that from 1 August, employers will have to pay employee’s National Insurance Contributions and pension contributions and can no longer claim a grant for these. Until August 31 the government will pay 80% of furloughed employees wages up to a cap of £2,500 for hours not worked. Employers must pay employees for the hours they work. Employers funding of employers’ NICs and pension contributions applies to both the hours not worked and hours worked if any i.e. no government funding.
September
From 1 to 30 September the government will pay 70% of furloughed employees wages up to a cap of £2,187.50 for hours not worked. Employers will pay 10% of wages to make up 80% total up to a cap of £2,500 plus employers’ total NICs and pension contributions.
October
From 1 October until the end of the scheme on 31 October the government will pay 60% of wages up to a cap of £1,875 for the hours the employee does not work. Employers will pay 20% of wages to make up the 80% total up to a cap of £2,500 plus employers’ total NICs and pension contributions.

Need help? Do not hesitate to contact us on info@elsburys.co.uk or visit www.elsburys.co.uk

HMRC have updated their guidance on how different circumstances affect the self-employment income support scheme (SEISS).

In particular, further information has been added about what claimants must confirm to HMRC if they are non-resident or have chosen the remittance basis.

View the updated guidance at https://www.gov.uk/guidance/how-different-circumstances-affect-the-self-employment-income-support-scheme.

SELF EMPLOYED GRANT UPDATE

Sorry to bother you on a sunny Sunday evening – however, having been asked a question about self-employed and whether there was any additional news today, I decided I would log on to HMRC web site and see if there was any new news!

The following link gives some better clarity on what the self employed can expect when making a claim.

The link is here: https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme

Things to note in my opinion are the fact they are going to make you ‘make a claim’ i.e. they will not just give handouts willy-nilly. My gut feeling was true in that, HMRC want u taxpayers to make a claim. What that means in reality is that if someone makes a claim when they are not entitles, it will mean HMRC would have some form of recourse.

The key points from the link are:
You can claim if you’re a self-employed individual or a member of a partnership and you:
• have submitted your Self Assessment tax return for the tax year 2018 to 2019
• traded in the tax year 2019 to 2020
• are trading when you apply, or would be except for coronavirus
• intend to continue to trade in the tax year 2020 to 2021
• have lost trading profits due to coronavirus

You will need to confirm to HMRC that your business has been adversely affected by coronavirus. HMRC will, as usual, use a risk-based approach to compliance. Note the word ‘adversely’ – a slight downturn in my opinion will not count as adversely. Maybe comparing it to a bad winter, or short period in between contracts/jobs will help you decide if this is adverse. I wouldn’t be surprised if when people come to submit there 2020/21 tax returns HMRC will look at profits and compare to prior years (excluding the grant) to decide whether you were ‘adversely’ affected by coronavirus!

I am aware of many self-employed persons able to continue to trade throughout this pandemic, and originally it wasn’t clear if they would simply receive a grant in to their bank account – despite not losing any income. This is now clarification that this would not be the case and that everyone entitled to the grant must claim – how we will do this is not yet 100% clear but it does indicate that a claim can be made through your Government Gateway Account.
For instruction on how to set up your Gateway please follow the guidelines per my email of 9 April 2020 about claiming Furlough pay for employers. A quick cap of how to set the account up is below. There may well be the chance for us as agents to make a claim for you, however, to cover all basis please set up your account accordingly. It is useful anyway as it allows you to view your tax position as well as other related HMRC matters.

Email of 9/4/20

HOW TO CREATE YOUR GOVERNMENT GATEWAY ACCOUNT
If you click on the following link https://www.gov.uk/log-in-register-hmrc-online-services , click ‘SIGN IN’ then on the sign in page select ‘CREATE SIGN IN DETAILS’ (just below the sign in boxes).
Follow the steps accordingly and make a note and keep safe your gateway ID and password!
Please appreciate that we have hundreds of clients that this effect, so our ability to easily help everyone with this process is limited, so please give it a go and only contact us if you are completely stuck.
Some of the common issue’s people have are where HMRC thinks you already have an account. This often is accurate, but people didn’t realise they or an old accountant set it up for them. Click forgot details if this happens.
Occasionally HMRC also have the wrong address details for you (an old one) – if this is the case please contact HMRC here https://www.gov.uk/government/organisations/hm-revenue-customs/contact/online-services-helpdesk
Note the change in colour scheme from green/black on log in, to blue/black once in!
______________________________________________________________________________________________________________________________________

Once logged in, if not defaulted to, please go to the business tax account summary (as below) .
Please select manage account, and if there is no reference to self-assessment here, please select the link to ‘get online access to tax….’. Follow the steps to ensure this section is activated correctly as I believe this is where you will be able to make you claim!

PLEASE NOTE:
At this stage, the above is my interpretation of what HMRC will expect of you to make a claim. This is similar and in line with what employers are having to do for Furlough claims.
Some clients have experienced difficulties logging in, but unfortunately in these instances we are unable to help. You will need to contact HMRC. We have found from feedback that using their ‘online chat’ to be the quickest way.

Please be persistent and patient with this process, it is not easy for all. But also please appreciate we are under great strain to help as many clients as possible, especially this coming week with Furlough Claims, so it won’t be easy for us to quickly and efficiently get around to helping everyone with their issue’s. Again – HMRC is probably the best support line as generally clients issue’s are technical ones related to creating their gateway accounts, or adding the self employment taxes section – these are not issue’s we can help with I am afraid. One tip – many clients have found they have an account already, but didn’t know. Don’t be afraid to select the forgot password, or forget credentials option if need be. Other are finding that HMRC also have the incorrect address. Only calling HMRC in this instance will help.

Good luck!

(please note that other than the link to the HMRC web site – my views and opinions are of my own.  Please seek professional advice when it comes to acting upon any of the guidelines above).

How HMRC works out total income and trading profits for the Self-employment Income Support Scheme
Find out how HMRC will work out your income and profits if you’re self-employed or a member of a partnership in the UK and have lost profits due to coronavirus (COVID-19).
Published 14 April 2020

HMRC will assess your eligibility for the grant based on your total income and trading profits. This guide details how we do this.
You can use this guide to find out if you’re eligible and how much you may get.
Trading profits
We will use the figures on your tax returns for your total trading income (turnover), then deduct any allowable business expenses and capital expenditure.
Allowable expenses include:
• office costs, for example stationery or phone bills
• travel costs, for example fuel, parking, train or bus fares
• clothing expenses, for example uniforms
• staff costs, for example salaries or subcontractor costs
• things you buy to sell on, for example stock or raw materials
• financial costs, for example insurance or bank charges
• costs of your business premises, for example heating, lighting, business rates
• advertising or marketing, for example website costs
• training courses related to your business, for example refresher courses

It also includes:
• any business expenses deducted through the trading allowance
• capital allowances, used to buy assets used in your business
• qualifying care relief
• flat rate expenses

We will not deduct from your trading profits:
• any losses carried forward from previous years
• your personal allowance

Example 1
If your total trading income (turnover) in each of the tax years 2016 to 2017, 2017 to 2018 and 2018 to 2019 was £20,000, and you claimed the £1,000 trading allowance each year.
This is worked out as:
1. £20,000 deduct the trading allowance of £1,000 = £19,000
2. Multiply £19,000 by 3 = £57,000
3. Divide £57,000 by 3 = £19,000
Your average trading profit would be £19,000.
If you have more than one trade in the same tax year
We will add together all profits and losses for all these trades to work out your trading profit.

Example 2
If you only traded in the tax year 2018 to 2019, and made a £60,000 profit for your first trade, and then a £20,000 loss for your second trade, your trading profit for that year would be:
Trade 1 £60,000 profit deduct trade 2 £20,000 loss = £40,000
If you traded for more than one year
To work out your average trading profit we will add together all profits and losses for all tax years you’ve had continuous trade.

Example 3
If you made:
• £60,000 profit in tax year 2016 to 2017
• £60,000 profit in tax year 2017 to 2018
• £30,000 loss in tax year 2018 to 2019
1. Add £60,000 and £60,000 then deduct £30,000 loss = £90,000
2. Then divide £90,000 by 3
Your average trading profit for the 3 tax years would be £30,000.

Example 4
If you did not trade in tax year 2016 to 2017 but made:
• £25,000 of profit in tax year 2017 to 2018
• £45,000 of profit in tax year 2018 to 2019
1. Add £25,000 and £45,000 = £70,000
2. Then divide £70,000 by 2
Your average trading profit for the 2 tax years would be £35,000.

Total income
Your total income is the total of all your:
• income from earnings
• trading profits
• property income
• dividends
• savings income
• pension income
• miscellaneous income (including social security income)

Eligibility
Your trading profits must be no more than £50,000 and more than half of your total income for either:
• the tax year 2018 to 2019
• the average of the tax years 2016 to 2017, 2017 to 2018, and 2018 to 2019

Example 5
If profits for the following years are as follow: 2016 to 2017; 2017 to 2018; 2018 to 2019

Average for the 3 tax years
Trading profit £50,000 ;£50,000; -£10,000 – Average £30,000
Pension income £15,000; £15,000; £15,000 – Average £15,000
Total income £65,000; £65,000; £5,000 – Average £45,000

Trading profit are more than half of your total income Yes Yes No Yes
So even if you made a loss in the tax year 2018 to 2019, you would still be eligible for the grant because your average trading profit for the 3 tax years:
• is £30,000 – which is less than £50,000
• is more than half of your total income of £45,000

Published by HMRC 14 April 2020
Click here to go to HMRC web page

Claim for your employees’ wages through the Coronavirus Job Retention Scheme

HMRC Employer guidance has been updated on claiming furlough pay for your qualifying staff.
Click here to read more.

HMRC guidance has been updated for employees and furlough pay to include some common questions they were receiving.
Click here to read more.

Chancellor Rishi Sunak has announced further measures to support firms affected by the coronavirus crisis by bolstering business interruption loans for small businesses and announcing a new scheme for larger companies.

Further details on the measures can be found at https://www.gov.uk/government/news/chancellor-strengthens-support-on-offer-for-business-as-first-government-backed-loans-reach-firms-in-need.

The government have updated literature about the measure put in place for self-employed and employees.

EMPLOYERS
For business looking to claim wages for staff through the Coronavirus Job Retention Scheme please read this
https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme
Please note that Director of their own company who pay themselves a salary and dividends through the own company are not covered by the self-employed scheme.
If you are genuinely having to furlough yourself, you will be entitled to 80% of your salary (not dividends).
To be furloughed you genuinely cannot be doing any work for your business, so please consider this carefully.

SELF EMPLOYED
To find out more details about the self-employment scheme please read here
https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme
Please pay attention to some of the detail which wasn’t previously known – i.e. £50,000 profit cap and also note the other potential ways the government can help at the bottom.

Once again, we can only interpret what is within those links, as can you. We feel that they are pretty black and white, and it is also clear that details on how one would physically make a claim will become clear in due course.

HMRC have made it clear you do not at this stage have to contact them, as they are aware of those that are UK registered taxpayers and will be in contact in due course
With regards to those that do not have three years on record, I believe the intention is to use what is on record. They have not made clear whether they would accept a 2019/2020 filing though for those without three years on record or have just become self-employed. They may expect people to use the Universal Credit scheme – https://www.gov.uk/universal-credit
Once again – kind regards and stay safe!