RSM Ireland

Irish guidelines for tax on income from letting short-term accommodation

The Irish tax authorities, on April 17, issued new guidance (Tax and Duty Manual Part 04-01-20) to taxpayers on the tax treatment of the provision of short-term accommodation in cases where a landlord/tenant relationship does not exist, for example, those arranged via an online accommodation booking site such as Airbnb.

Revenue’s position is that income from a licence arrangement, i.e. an arrangement where the occupant is considered a guest, and does not enjoy the rights of a tenant, should be subject to income tax, PRSI and USC under Schedule D Case IV (other income), or schedule D case I where the income arises in the course of an active trade. In determining whether a trade is being carried on, one of the determinative factors, among others, will generally be the frequency of which the property/room is available for occupancy and its usage by guests.

When determining the profit amount subject to tax, the availability of deductions and allowances, will be dictated by whether the income should be taxable under schedule D case I as trading income or under schedule D case IV.

Previously an area of contention, Revenue have confirmed in their guidance that rent-a-room relief is not available in respect of a room(s) used to provide short-term guest accommodation, through online accommodation booking sites. Instead, Revenue have geared the relief to lettings of a more permanent nature.

Revenue have also flagged a potential VAT and CGT exposure where the income arises from a trade. An obligation to register and account for VAT will arise where the turnover exceeds the VAT registration threshold. Additionally, a CGT liability on the sale of the property generating the income could potentially arise, where part of the building was used exclusively for the purposes of a trade.

Should you have any queries in respect of this update, please contact Seán McCarthy (smccarthy@rsmireland.ie), or your usual contact at RSM Ireland.

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