The increased use of accommodation websites like Airbnb could open up a whole new line of potential tax revenue for local authorities.
Recent case law suggests that the door is opening for local authorities to be able to levy commercial taxation rather than residential taxation against such short-term leases made popular through online rental platforms.
A recent injunction against a tenant renting out his property on Airbnb was upheld on appeal when Judge Luba QC ruled that the flat was being used for commercial hire and not residential use.
In the case of Bermondsey Exchange Freeholders Limited vs Ninos Koumetto (Trustee in Bankruptcy of Kevin Geoghehan Conway) Judge Luba said there was a significant difference between letting a property to a family occupying the property as their home, and letting the property to transient visitors as a short term let.
A ruling like this could help shift the taxation system away from council tax to business rates, significantly increasing the potential tax revenue from the property.
Such a shift would be in line with growing demands from local government to be able to regulate short term lets. We’ll look at this in our next article.
This possibility could bolster the likelihood of the Government reviewing the short-term let industry and the need for increased regulation, with an eye, no doubt, on the prize of increased tax revenue.
If you're affected by any of the above or would like advice in respect of any real estate matter, please get in touch.