EXTRA taxes are on the way for homeowners who let out their properties while they are on holiday, warns a Shropshire accountant.
Tax expert, Rob Ellis, who runs Welch and Ellis, in Willow Street, Oswestry, is warning homeowners to be aware of the new tax implications of schemes such as Airbnb as the Treasury cracks down on the use of tax breaks for lodgers.
Currently, owners can earn up to £7,500 per year tax free by renting a room to lodger, and often do this when offering their whole home for short stays, under the "rent-a-room" relief.
But under new rules to “clarify” the relief, from April 2019 they will only get the tax break if it is part of a property – not the whole home – and only if the owner is present for at least some of the guest’s stay.
Rob, who also lives over the border in Llanfechain, Powys, said: “HMRC have announced they plan to crack down on the use of tax breaks for lodgers and while this is more a clarification than a total change in the rules it is important people fully understand the implications.
“The ‘rent-a-room’ relief was always intended to apply to people having a lodger in their own home while they are living there. However, some have taken it to also include doing this when they live elsewhere or renting the entire property while on holiday or working away. From next year HMRC will look very closely for this and tax penalties may be applied.
A brief search of Airbnb properties in Oswestry alone shows that a huge number of them are not just offering a chance to rent a room but the entire property and Rob is concerned many may not realise the implications.
He said “If people are in any doubt and don’t want a nasty shock I would urge them to consult a tax professional and make sure they have things in order long before the new tax year starts.”
A SHROPSHIRE and POWYS accountant is urging the public to back a campaign to scrap VAT on fire safety products.
Rob Ellis, Welch and Ellis Accounting in Oswestry, is throwing his support behind the Axe Safety Tax campaign, launched by company Gas Tag as he believes it is wrong to charge VAT on products designed to save lives.
He thinks the tax is unfair to most small-scale landlords who may only own one or two properties, often bought to provide them with a pension or inherited after the death of a family member.
The campaign is calling for the Government to scrap the 20 per cent tax which is added to a range of products and services included fire alarms, carbon monoxide detectors, gas safety checks, fire doors and extinguishers.
Central to the campaign is the belief adding VAT to the products is not only a blow for small landlords and agents, it puts the public at greater risk as it is becoming increasingly expensive to ensure rental properties are compliant. In addition, these products are also bought by people to keep their own homes safe.
Rob, whose office is in Willow Street, but who lives in Llanfechain, Powys explains: “At a time when the country is still reeling from the horrendous tragedy of the Grenfell Tower fire, it seems wrong safety products are taxed as though they are luxury items as they are bought by both landlords and the public alike.”
He feels it is especially important for landlords as they can face fines and even imprisonment for failing to conduct gas safety checks and not providing smoke and carbon monoxide alarms or ensuring furniture is fire-safe.
Rob who runs a firm helping small businesses with their book keeping and accountancy needs says he is well placed to understand the importance of tax and why we need to pay it. But adding VAT to these products at best makes no sense and at worst could prove dangerous.
He said: “I would hate to think that anyone would not be able to afford to keep themselves safe because these products had prices inflated by VAT.”
“In contrast, annual MOT inspections which are also intended to save lives are zero-rated.”
Now Rob is urging people to sign a petition to call for the VAT to be scrapped, which has been set up on the Parliament website.
When unquoted shares are involved, it is likely that HMRC's share valuation division will negotiate an acceptable value with you. The approach will differ according to whether you are disposing of a majority or a minority shareholding.
Individuals that own and let property are facing a number of changes to the way in which their rental income, and more importantly, the deductions they can make from their rents for income tax purposes, are changing.
1. An increase in the rent-a-room allowance.
2. The abolition of the wear and tear allowance if you let furnished residential property that is not part of a holiday lets business; and the introduction of a new replacement furniture relief.
3. The gradual restriction of higher rate income tax relief for finance costs.
A SHROPSHIRE and POWYS accountant is offering free advice sessions via Skype to help those living in remote rural communities who are concerned about the new budget changes.
Rob Ellis, Managing Partner of Welch and Ellis, which is based in Willow Street, Oswestry is offering free sessions to anyone who is interested, but is particularly keen to help those who live in remote and rural communities, or who may find it difficult to find time to visit an accountant for brief advice due to family or work commitments or health issues.