Airbnb faces HMRC legal action

22 Oct 2019

Airbnb Receives Warning from HM Revenues and Customs

Global home rentals website Airbnb has received a warning from HM Revenues and Customs (HMRC), who could take legal action against the company.

According to a note in Airbnb UK’s recently filed accounts, HMRC have been in contact regarding “tax laws or regulations impacting the company’s business.” It goes on to suggest that:

“The company is also subject to tax inquiries and proceedings concerning its operations and intra-company transactions. Some of these matters may result in litigation.”

The US-based business has two UK arms: Airbnb UK and Airbnb Payments UK. Last year, Airbnb UK paid £146,059 in tax on profits of £455,076 and a £14.2m turnover. Their UK payments entity turned over £273.2m, but only made a £1.2m profit, paying £234,788 in tax.

George Bull, senior tax partner at audit, tax and consulting service provider RSM, said:

“Nobody is saying that Airbnb has done anything wrong. The law is complicated, they have to decide how they are going to file their tax returns, they may do it on a basis that HMRC doesn’t like.

“However, the phrase ‘This may result in litigation’ sounds quite serious. It sounds as though Airbnb is expecting a big tussle with HMRC to get these figures across the line.”

While HMRC hasn’t yet commented on the matter, an Airbnb spokesperson said:

“We follow the rules and pay all the tax we owe in the places we do business. That is true as rules apply today and will remain true for whatever rules apply in future.

“As with many other companies, these are routine checks and we are working closely with HMRC.”

In the past, such checks required other companies (including PayPal and eBay) to pay an increased tax bill. Basic tax rules could be to blame, as they may be falling behind when it comes to large companies trading on digital platforms, allowing for disproportionate figures.

The Organisation for Economic Co-operation and Development is looking to combat this. This month, they have put forward proposed changes that would see global technology companies, like Google and Apple, pay more tax.

By Melissa Jones