Monthly Archives: October 2018

HMRC home in on Airbnb tax affairs

The Financial Times reports this morning that HMRC are enquiring into the tax affairs of Airbnb. Of particular interest to HMRC may be the low profits as against high revenues, something which was criticised last year by Bruno Le Maire, the French Finance Minister.The investigation serves as a timely reminder to those that use the service to rent their rooms or entire homes in the UK, to ensure they are declaring the income generated and paying the appropriate tax.Rent-a-room relief is set at £7,500 per year so those earning under this amount (or half if the income is shared with another person) on Airbnb do not need to file a return. Landlords who do not live in the home they rent out do not qualify for the relief.For those that are unable to claim the relief, or that earn over the threshold, a tax return must be filed.  Some may wish to consider whether their tax liability is lower by claiming the relief, or by being able to deduct expenses in the usual manner, something which is not available under the rent-a-room scheme. As the popularity of Airbnb rises, HMRC may continue to take an interest in the tax revenue taken and therefore ensuring compliance with the rules will only become increasingly important for users of the service.

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Sister (P)act 2: Back in the Co(habit)ation

Some people are using the extension of the civil partnership rules to heterosexual couples as an opportunity to highlight the ways in which the rules on inheritance tax (“IHT”) favour married couples (or those in civil partnerships).Whilst it seems unlikely at this stage that the Government will submit to calls to allow siblings similar access to these IHT exemptions, it does raise the interesting ethical question about why avoiding IHT continues to be so closely linked to marriage or civil partnerships. The argument that it is to preserve family wealth does not hold, because IHT is taxed at 40% when the surviving spouse does eventually pass wealth down to children. Indeed, a married couple receives the exemption whether or not they have children, whereas a different individual may wish to pass assets to a loved niece or nephew via their own sibling. In the former scenario IHT is only taxed once (on the death of the surviving spouse), whereas in the second scenario HMRC takes a 40% cut twice.Given that the exemption simply requires that individuals be married or in a civil partnership, it begs the question of what the justification is for the continued generosity towards couples in the 21st century.

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A New Homes Ombudsman has been announced by government – but that’s about it!

The Ministry of Housing, Communities and Local Government made a new announcement on 1 October 2018.On the face of it, it is brilliant news. The announcement addresses the need for planning reform to provide the homes the country so desperately needs, measures to improve the safety of high rise buildings following the Grenfell Disaster and a ‘New Homes Ombudsman’.This new ombudsman is said to “champion the rights of homebuyers and help ensure that when they buy a new home they get the quality of build they rightly expect”. The announcement continues that “the New Homes Ombudsman will protect the interests of homebuyers and hold developers to account when things go wrong.”This sounds like great news for homebuyers and could help boost the market if buyer concerns over ‘dodgy developers’ are reduced. However, developers would be right to be slightly more sceptical about the announcement. This is because the government has stated that they intend to introduce legislation requiring developers to belong to a new homes ombudsman – and frustratingly, that is all the information there is at present!This leaves developers and home builders with the potentially onerous obligation of being required, by legislation, to belong to a watchdog but there is a complete lack of detail about that watchdog. There is no information as to how many watchdogs a developer will have to select from when they join, how the watchdogs will be made up or what powers they will have.This seems to be a bit like the recent announcement on ground rents – where a grand statement has been made but those it affects will have to wait some time (and presumably until after Brexit is sorted) until housing is back on the agenda and some clarity is finally given.

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Can it be right that average rents are 30% of a person’s income?

The BBC has published an article with some shocking statistics on the affordability of renting for young people.The article states that “a salary of £51,200 is needed to “afford” to rent a one-bed London home”. This is an astonishing figure, particularly when you consider that this could provide you with a 10% deposit for a half million pound house (should you be able to save up these monies instead of paying them on an annual rent).The report focuses on those in their 20’s, as recent studies have shown that they are more likely to rent.Collyer Bristow LLP has commissioned its own report looking into ‘generation rent’. A copy is available here.This report found that 100% of 20-24 year olds have aspirations of owning their own home. This seems an insurmountable task when you consider the huge rents they are expected to pay each year.Alex O’Connor, Partner in Commercial Real Estate said: “We all know that there is a housing crisis in the UK and that it is particularly acute in London and the South East. We have seen developers bring forward new tenures, such as dedicated Build-to-Rent schemes, but home ownership remains the ultimate goal.”“It is interesting that all of our panel’s 20-24 year olds say that they will own their own home, only for those hopes to be dashed when the reality of buying a property hits home. That picks up slightly, perhaps as our panel start to marry and think about starting a family.”Whilst measures are being implemented, new types of tenure considered and there are new and creative ways being introduced to improve the market, the housing crisis is not going to disappear and something needs to be done urgently if young people’s dreams of owning their own properties are to be fulfilled.

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HMRC plots a route to CGT success

A recent tax tribunal case has confirmed that an individual was liable to CGT on an off-plan property sale throughout their period of ownership, notwithstanding that part of the period included a time when the property had not yet been built. This ruling confirms that private residence relief turns on occupancy and that, broadly speaking, purchasers will only qualify for PPR for those periods of actual occupation. This ruling is significant for those who buy off-plan properties because it may be some years before the property is built and the new owners can move in.This ruling may not help to calm the nerves of the shareholders of some of the UK’s largest housebuilders, whose share prices have all wobbled in the last few days following Teresa May’s announcement that the Government intends to introduce a new SDLT surcharge on non-UK resident purchasers.

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Bit-coining it in: HMRC waiting for cryptocurrency windfall?

The Association of Taxation Technicians have warned individuals of the approaching time limit to register for self-assessment for the first time, specifically reminding people that profits and gains made on cryptoassets will need to be disclosed and tax may be due.It is also worth considering whether losses could be reported to mitigate tax paid on other income or gains.Individuals will need to consider (and HMRC will presumably be very interested to know) whether they are trading or investing in cryptoassets, the former being subject to income tax rather than capital gains tax and therefore taxed at a much higher rate.Given the increase in value of cryptoassets and their popularity in recent years, it will be interesting to see how much revenue HMRC make from cryptoasset taxation and what active steps they may take to ensure compliance if they believe there is a under-reporting of liabilities.

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