Property Management Agents - VAT on the ‘Airbnb’ Model
Serviced apartments operating under the ‘Airbnb’ model (or similar) are becoming more and more popular, and as a result there is also an increase in the number of property management agents looking to take advantage of this.
It must be recognised that where a person starts to hold out their domestic accommodation as effectively hotel, holiday accommodation or similar then it is likely that HMRC would regard this as a business activity if done with regular intent. The VAT liability of such lettings will be regarded as Taxable at the Standard rate and would count towards the VAT registration threshold.
Returning to the issue of the role of property management agents this is where, typically, the agent managing the property on behalf of the landlord (i.e. advertise the property through their platform, greet the guests on arrival, clean and maintain the property etc.) and a commission for these services would then be charged by the agent to the landlord. Depending on certain circumstances, this sort of relationship could trigger several different VAT implications and it is very important to understand these before supplies are made.
An agent may act as either a ‘disclosed’ or ‘undisclosed’ agent, with each requiring different considerations from a VAT perspective. For instance, an undisclosed agent may have to consider the value of the underlying supply as well as their agency services (the commission), whereas a disclosed agent may only consider the value of the agency services. This point is crucial when considering VAT registration obligations clearly.
Furthermore, depending on the exact nature of the supply and the agreement between the parties, there may also be the consideration of the Tour Operators Margin Scheme (TOMS). There are very particular rules that apply to TOMS and these would need to be considered in detail on a case-by-case basis, but again, if applicable, the implications of falling within the scheme are significant from a VAT perspective. It is also clearly important for landlords in these situations to understand the VAT position too.
It is a growing industry with opportunities available in terms of legitimate VAT planning, but also significant repercussions if VAT is not addressed at the right time. A good example of where VAT can get complicated as we say. If you would like to discuss further, please contact a member of the Centurion VAT team at firstname.lastname@example.org