News that accommodation web site AirBnB paid on £200,000 in corporation tax on £675 million of rents from customers in the UK last year should not come as a surprise.
Media reports are critical of the firm for piling up profits and paying little tax – but their analysis of AirBnB’s accounts is not necessarily correct.
As a middleman, AirBnB collects rents and other charges from customers, takes a cut and passes the balance on to property owners.
According to the AirBnB web site, the web business deducts a 3% service fee from the payments made to hosts by guests.
Interpreting the accounts
Accounting rules state that the rent money does not belong to AirBnB, who hold the cash on behalf of their landlord clients.
As such, the rent money is not income for the business but for the hosts, who should report the earnings to their tax authority and pay income tax on their profits.
That makes the interpretation of AirBnB’s accounts different from that suggested in the media – the UK government should receive two streams of taxa relating to AirBnB. One as tax on profits from the company relating to their service charges and other fees. The other comes as tax on rental income from the hosts.
Airbnb said in a statement: “We follow the rules and pay all the tax we owe.”
Where the profits came from
The company has three subsidiaries managing business in the UK.
One in Dublin takes bookings. Two more in the UK market the web site and manages payments.
The Dublin firm pays corporation taxa in Eire. In the UK, one subsidiary made a £960,000 profit and paid £188,000 in corporation tax. The other made a £463,000 profit which was wiped out by giving shares to staff, leaving no profits to pay tax against.
“Our UK office provides marketing services and pays all applicable taxes, including VAT. The Airbnb model is unique and boosted the UK economy by £3.46bn last year alone,” said a spokesman.
AirBnB operates from San Francisco and runs a worldwide operation linking hosts with homes or rooms available for short term lets with travellers.