Should AirBnb Flat Owners Pay Business Rates?

airbnb business

Business rates, a bit like VAT are an archaic form of taxation. Both are expensive to administer and with business rates, there is no attachment to turnover or profit.

I’ve long argued that VAT is a total mess. It could be completely simplified if all companies with a VAT number paid no vat and charged no vat to those with a VAT number and those without, got charged.  The company doing the selling, just then simply sends HMRC the VAT they charged.  Not this ludicrous exchange system where you offset one against another and pay the difference.  It amounts to pretty much the same and would be much easier for smaller companies to administer.

OK, rant over. Let’s talk about business rates. Currently if you rent a business premises, your premises has a rateable value and you pay rates on that value, regardless of turnover. There are concessions for some industry sectors but we’ll put those aside for now.  Two shops of the same size, will be paying pretty much the same rates.  Sometimes those rate can be 1/2 or more of the actual rent.  I once rented a unit for £650 a month and had to pay £460 a month in rates, which is ludicrous.

OK, 2nd rant over…. Let’s look at AirBnb!

There are many landlords who rent their properties out long term.  Like it or not, these people who have enough money to buy properties, do very well in terms of their return on investment.  A £240,000 apartment where I live, will rent for £1100 a month, £13,200 a year. That in itself is pretty good but bearing in mind many of these properties were bought some time ago,  you could quite easily have a flat you bought for £55,000 bring you in over £500 a month, 10% of your investment.

I know people who bought places many years ago for £35-£36,000 who now get around £600 a month in rent, others will say we need them to provide homes on a long term basis to those who can’t afford to buy.

I remember 25 years ago, I worked with a guy who’s family had invested wisely in property.  Then one day, the father gave his 3 sons £50K each (quite a lot in those days) to go out and do it for themselves.  These guys were smart, had friends in financial circles and soon had 3 flats each, all mortgaged but all with tenants.

Well, I say tenants, they weren’t exactly tenants. What these guys did was sign their tenants up on Bed and Breakfast contracts.  In return for dropping around a couple of pints of milk, a loaf of bread and a dozen eggs a week, they were able to get around typical “landlord v tenant” contracts and instead benefit from a very loose contract, which gave the tenant, pretty much no rights.

So, here we are in 2016 and AirBnb is all the rage. You see, a bit like my friend from the past, a Bed and Breakfast deal isn’t like a tenancy.  It can last 1 day, it can last 200 days but it’s not a tenancy, it’s a bed and breakfast. The criteria of the standard of accommodation is not as stringent and to be honest so is the “breakfast”.

You could rent out a room in your home and offer a cooked breakfast in the morning, or simply provide the equipment and food for people to do it themselves.  And of course the food is down to the person renting, there is nothing to say breakfast has to be anymore than a few tea bags and a packet of corn flakes.

Most don’t rent out long term, they are looking for people who want a night, maybe two or three or even a week. For that, they can charge much more than if they were trying to rent for 6 months.

But with all that coming and going, disruption for neighbours, probably an increase in litter (if people are holidaying) and potential for late night parties and a few extra police calls (quite a few reports of property damage) Should people renting out flats as an AirBnb, actually start paying business rates?

I mean it is a business.  It’s completely different from somebody renting on a 6 month term on an official tenant and landlord agreement.  This is not providing a home, it’s like any other BnB, it is a business and it comes with all of the potential hazards of any other business.

In fact, it would probably come with more hazards.  You’ll probably more likely get police calls when a “live in” owner in a block of flats has enough of the music at 3am, than you would if there was somebody living there full time.

The government is continually scratching around trying to get taxes from whoever they can, will this be their next port of call?

I will watch this with interest.

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2 Comments on “Should AirBnb Flat Owners Pay Business Rates?”

  1. Stephen Lewis

    Yes, if they renting out the entire property the owners should pay business rates. They should also require planning permission for turning a residential property into a commercial activity.

  2. Paul

    I have a summer house at the bottom of my garden, I now have to pay business rates in addition to council tax on my home, because they have seen my listing on Airbnb! I have another property, I was paying council tax, as soon as I advertise on the Airbnb site, I have to switch to business rates, and I guess I will now pay a load more, planning, business rates in councils might be also using Airbnb to raise tax incomes?

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