HMRC launches staycation tax crackdown – holiday let owners face criminal charges
Millions of Britons have been holidaying in the UK due to the pandemic, and this has triggered a rush to invest in holiday lets. Owners have been banking fat profits but they must also pay income tax on them or risk criminal charges for tax evasion.
Tax experts warn that profits from summer staycations will be an easy target for HMRC following the boom of the last two years.
They are urging holiday let owners to make full disclosure when submitting their self-assessment returns from 31 October.
Accountancy group UHY Hacker Young said the crackdown on holiday let tax avoiders will start early in 2022, with owners facing investigations if they fail to properly report their earnings.
There is no hiding place as HMRC has the power to request information from third parties such as holiday booking sites to check people’s tax position.
This includes the entire databases of popular holiday booking sites.
Airbnb has previously agreed to share information on income earned by its UK hosts, as part of a 2020 tax settlement with HM Treasury.
Under the deal, Airbnb agreed to pay an extra £1.8million in tax and share data on hosts’ incomes with HMRC.
UHY Hacker Young partner Neela Chauhan said owners of holiday flats and cottages will soon file self-assessment tax returns covering the first year of the Covid-staycation boom, ahead of next year’s 31 January deadline.
She warned: “Many will be tempted to under report the windfall earnings they have made in that period.”
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She added: “Landlords are recommended to make sure they are aware of their tax obligations before spending their summer staycation windfall.”
Nearly two thirds of homeowners now consider holiday lets a good investment, according to research from holiday let website Original Cottages. It reported a 40 per cent increase in enquiries in the last year.
Personal finance expert Rachel Springall from Moneyfacts said low interest rates are encouraging savers to seek out alternatives to cash.
“The staycation surge has made holiday lets more appealing but there is also plenty of vital admin, including declaring income on yourself-assessment tax return.”
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