Can someone help me with VAT Taxes - UK?

[Berry1]

Hello,

Can anyone help advise me.  Do I need to pay tax on my whole Airbnb turnover or just the profit?

I am based in the UK and my turnover has gone past the VAT threshold.

Should I be filing for VAT on any profit or does it have to be on the full turnover?

Please help as the VAT bill for the turnover is massive. 

Thanks

[Nikki58]

Thresholds for VAT in the UK are according to the information here on Airbnb site linked to the EU and collected automatically. So what's happens after Oct 31st IF we're no longer in the EU - does this mean that VAT will NOT be automatically collected by Airbnb as they current info on site says it's required to do so for all EU countries?

[Jeff158]

@Nikki58 

Every booking you get, you are charged 3% +vat as a service fee, this is the only vat that airbnb collects.

Plus if you inform airbnb you are vat registered they will not charge you the vat on the service fee.

I don't think this will change if we leave the EU as airbnb has London offices.

Airbnb does not collect vat on your nightly rate, If you are thinking of going vat registered you need to consult an accountant.

[Nikki58]

Thank you for the clarification.  I had thought the European HQs were in Dublin too.

[Jeff158]

@Nikki58 

The HQ is in Dublin but they must also be vat registered in the UK otherwise would not be charging vat to uk hosts

[Gary438]

I hear Rishi Sunak is considering applying VAT on all UK Airbnb sales regardless of any thresholds!  There is not enough margin for hosts to cover this cost and I don't believe guests would bear a 20% increase in nightly rates. Will this spell the end of Airbnb in the UK?

[Lindsay180]

Hi, I know these posts were a while ago but can anyone please advise.

I’ve gone over 85k so should I register for normal VAT or the flat rate VAT scheme or keep my earnings under 85k (and give myself bit of a rest!!)? 
Any fellow host advice would be massively grateful! 
l

[Helen3]

Quite honestly I would talk to your accountant about the best way to do this @Lindsay180 

[Lindsay180]

I am talking to my accountant and financial advisor but I would like to understand what fellow hosts have done in this situation. 😊

[Mike-And-Jane0]

@Lindsay180 A few thoughts

1) Are you currently underpricing your listing by 20%? If not then you will lose bookings if you put the price up  to cover the VAT.

2) How much VAT do you pay on your costs? I suspect relatively little so the price increase would need to be near to 20% (maybe 15-18???)

3) Unless you can earn way over the threshold then just hitting say 90k revenue and paying 20% VAT ie 18K would leave your net revenue at 72K. Plus a bit for VAT on costs so perhaps you end up with 78K? Clearly only you know your figures.

Personally I would shut down in Jan/Feb/Mar and avoid the costs of heating etc whilst travelling to warmer climes.

[Nikki58]

The government website states registeration for VAT should be within 30 days of the month you went over the threshold earnings.

[Lindsay180]

Thank you. All VAT rules understood. I just would like to know whether hosts who are in this position have found it more beneficial to keep within the 85k or go for flat rate of 16.5% or normal vat. 

[Matthew1659]

Hi,

We are considering the following options for our AirBnB Property: - 

a) Continue to keep under £85k revenue and achieve circa £50k profit per annum after costs.

b) Register for VAT risking reduced bookings, but therefore remove the £85k ceiling and hope to return a higher yearly profit with a bigger revenue.

Has anybody gone with option b) above and have any advice / feedback.

Does anybody know what percentage of UK airBnB hosts are Vat registered?

[Mike-And-Jane0]

@Matthew1659 Depending on what action do you take to keep below £85K the answer will be different.

Some guesses and ideas below - Happy to work it through again with better inputs

Lets assume you currently shut down for 20%  of the year (ie 10 weeks) to keep below the limit and that 20% of your costs are VATable at the full rate

New scenario - Open all the time

Increase in revenue = 15% ( I am assuming you earn less when you have been shut down (Winter) = 12750

New revenue =97750

But if we assume a guest will not pay more than they pay today you will have to reduce this amount by the VAT you will pay (ie reduce by 20% - not quite the right amount but close) 

So revenue for compete year is  97750/1.2 = 81460

Increase in costs as you are open more (assume 30% of costs are variable) =.2*35000*.3=2100

Decrease in costs = 20% of 20% of 37100 = £1484 as you can claim back VAT on some costs

So new profit is 81460-37100+1484=45844 which is less than your current profit.

Now if you are shutting down for 50% of the year the sums will be very different.

Finally if you own the place with a partner could you have two listings and each have an 85K allowance? No idea if this is legal and you would need to talk to an accountant!

[Nikki58]

You could lower your rates and be available for the whole year  (though still use smart pricing and it will adjust for availbility and still be higher at some times, rather than higher rates for just half the year.  There are plenty of people looking for accommodation on a short term basis al  years, students on placements away from term time and home locations, locum healthcare workers (there's a lot of these!) none  of which want a tenancy with council tax, notice periods etc.