Earlier this year, Revenue clarified that such income earned from short lets of a room in your house or your entire house does not fall under the rent-a-room relief. This relief operates to exempt income from renting a room in your house provided that you receive less than €12,000 in any tax year (previously €10,000).
It seems that Revenue believe that such income cannot fall under the relief because income from short-term lets (e.g. guesthouses, Bed and Breakfast etc.) is considered to be trading income as opposed to rental income. Trading income is taxable under Schedule D Case I while rental income is taxed under Schedule D Case V both of which have different rules for calculating the appropriate tax liabilities.
In order to claim rent-a-room relief, the related income must ordinarily come under the remit of rental income (i.e. Schedule D Case V). Therefore, as Revenue believe that Airbnb income would be viewed as trading income, the relief cannot be claimed and the income is taxable.
Many believe that such income should not be treated as trading income and, therefore, should be available for relief. It remains to be seen if Revenue's interpretation of this is upheld as it has not been through the courts. It should be noted, however, that the more times that you let a room through Airbnb, the more likely it is that the income would be considered trading income.
The Irish Tax Institute has advised that those who have been in receipt of such undeclared income should seek to make a Voluntary Disclosure to Revenue in order to mitigate any penalties and punishment which may be imposed as a result of any underpayments of tax arising.
Those affected should consider their position as it is likely Revenue will analyse the data received from Airbnb and contact all those who they believe have not declared the income. At this point, it is likely that there will be less protection available from increased penalties and punishment.
If you have any questions in relation to any of this, please do not hesitate to contact me.
01 539 4330