Property Owners in Spain Could Face Unexpected UK HMRC Tax Bills

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A NEW LAW PASSED IN THE UK gives HMRC new powers to force foreign companies to pass on details of internet transactions, and Spanish Hoteliers are keen to ensure that these powers are enforced against private individuals who rent out their property in Spain, and fail to declare their income to the authorities.

Just last month Irish tax regulators successfully forced US-based private landlords’ website Airbnb to hand over details of private rental transactions. Airbnb confirmed that it would give details of users’ rental profits to the tax authorities in Ireland, leading experts to warn that HMRC would use the new law to force Airbnb to release details of rental information in the UK.

The new powers mean that Schedule 36 notices can now be served on any company deemed to be serving as an intermediary for the supply of products and services, wherever they might be located. Originally introduced by the Finance Act 2008, the law was intended to tackle businesses that trade online within the black market, such as eBay vendors and Amazon Marketplace sellers.

Sean Wakeman, tax investigations partner at Crowe Clark Whitehill, said “It is inconceivable that when HMRC can demand information from the likes of Amazon and Ebay, that it will not seek to exploit the relatively low-hanging fruit of private rental sites like Gumtree, Airbnb or TripAdvisor”.

“It is likely that the UK tax authorities will call upon reciprocal agreements as part of the European Union, and that the UK will seek to use European mutual assistance directives whereby information requests are effectively sub-contracted out to local tax inspectors”.

Spain’s hotel and tourism sectors have seen their profits tumble in recent years as consumers increasingly turn to private rental accommodation, and hotelier’s associations and hotel corporations are lobbying government to use the new powers to crack down on unregistered and illegal private renting in Spain.

Meanwhilte HMRC claims that their campaigns thus far have been designed to tackle businesses only, not individuals, but anyone who makes a sufficient income from private rental could be classed as a sole trader and be caught in the tax net.

Martin Bell, a Tax Dispute Resolution Partner at BDO said “HMRC have teams of analysts reviewing online information and any online advertisement to rent out a private room is as good as an advertisement to HMRC telling them you may have something to declare”.

It’s another concern for private landlords here in Spain. We reported in July that new laws in Spain require private property owners to apply for a licence to privately rent out their apartments or villas.

Failure to comply with the latest Spanish legislation can lead to prosecution and fines for the property owner, the advertiser, and any agent employed to manage the property. Fines are set at a minimum of €6,000 and a maximum of €90,000.

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