Tax: Short-term Lets

Question

Asked by

To ask Her Majesty’s Government what steps they will take to ensure that all providers of short-term lets are identified by Her Majesty’s Revenue and Customs and are paying an appropriate amount of tax.

My Lords, I beg leave to ask the Question standing in my name on the Order Paper, and I remind the House of my interests as declared in the register.

My Lords, the Government seek to prevent non-compliance with tax through targeted education and support, and by responding strongly to those who break the rules. HM Revenue and Customs has dedicated teams looking into those who have not voluntarily made themselves known—known as the hidden economy—including those who let property on either a short-term or a long-term basis.

I thank the Minister for that Answer. However, will HMRC be persuaded to introduce an express declaration on all tax returns, with short-term let property addressees and income having to be disclosed in full, and will it provide that information to local councils? That will then help to enforce the 90-day limit. That is important following the “Inside Out” programme on BBC1, which identified how you could go way beyond 90 days with impunity if you followed its advice.

People already have to make that declaration via tax form SA105. For the latest two years for which numbers are available, the number of people in that position was 2.48 million, and that rose to 2.58 million, reflecting the increase in the number of people earning income from a property, to which my noble friend referred. However, the number of days for such lettings is limited to 90 in London. It is very important that people declare all income, because it is taxable.

My Lords, Airbnb, a significant company in this field, is apparently being looked at closely by Her Majesty’s Revenue and Customs, but it seems to be engaging in a practice that we associate all too easily with multinationals: transferring profits outside the UK taxation regime. Are the Government tackling this fully, and do we not need international support in getting control over these companies?

That is a good question. Whether it is Uber or Amazon, we are genuinely wrestling with how to capture the income due here. We have made some changes to taxing digital companies but, with the spread of technology and the sharing or online economy, all Governments will have to do more in this area.

My Lords, the Minister talked about people making these declarations as part of their tax return. However, if people do not complete a self-assessment tax return while still letting property, they do not fill in such a form. That is one weakness in the Minister’s answer. The response to a freedom of information request said that HMRC’s Let Property campaign produced just a fraction of the number of disclosures that HMRC was expecting. The Government estimated that up to 1.5 million landlords had underpaid or failed to pay up to £500 million in tax in 2010. At the same time, people on low incomes cannot find a place to live.

We have done some work on that. The tax return I referred to is SA105, which is the self-assessment tax form. The HMRC Let Property campaign, to which the noble Lord referred, has encouraged 35,000 more landlords to register and yielded an additional £150 million for the Exchequer. It is not quite the full extent, but it is a step in the right direction.

We have a long-term rental licensing scheme whereby landlords have to register long-term lets. Why can the Government not devise a scheme for short-term lets on the same basis? That would help HMRC to gather the money due to it.

It is an interesting idea. There is a scheme in Newham and there was one in Westminster. We are open to looking at whether more needs to be done. We also recognise however, that short-term letting—the Airbnb-type sharing economy—is filling a useful gap in the market. Schemes such as property allowances and Rent a Room exist to help people take advantage of it.

Did the Minister see in the Times last week—the story was also broadcast—that the Hilton hotel chain claims it has been so undermined by Airbnb that it is killing the tourist industry in New York? That chain is about the biggest there is. Does the Minister agree that it is important to keep a watching eye on this? Local authorities would seem the best people for the job.

Local authorities have responsibility for enforcement if they feel the schemes are being abused, but it is not our responsibility to defend large international hotel chains. We should look after people who may be able to get valuable extra income into their homes as a result of a legitimate activity.

My Lords, will the Minister confirm that anyone who evades, rather than avoids, paying United Kingdom tax would not be permitted to sit as a Member of the House of Lords?

The noble Lord asks a leading question. I would worry about giving a precise answer, but tax evasion is wrong and it is against the law. All Members, who are responsible for legislating, must be held accountable to a higher standard for upholding the laws that they pass.