British Destinations

Tourism and UK Taxation in the news

Posted on October 12, 2020

There was a couple of things in the news re UK taxation and tourism which you may have missed and which could well be lost in the gathering storm of news coverage on the enhanced local lockdowns already announced in Scotland and due to be announced for England later in the day.

The first is the Brexit relate decision to remove the VAT retail export scheme that applied to goods purchased by non-EU visitors to the UK, which will be of interest to any destination with an international visitor focus.  The move was one of a number of decisions made by the Chancellor in mid-September: https://www.bbc.co.uk/news/business-54228889 but potentially lost among other higher profile issues. The scraping of the VAT rebate scheme on goods purchased from the end of 2020 will hit a number of retail centres particularly hard, for example Bicester Village. According to industry sources it will also seriously reduce the appeal of the UK as a destination within some key markets, an assertion which has prompted a number of more recent press reports for example:  https://www.standard.co.uk/news/london/london-lose-60000-jobs-taxfree-shopping-decision-upheld-a4568801.html . 

A number of organisations are likely lobby hard for a change of heart. Normally, once such a decision is publicly announced I would have held out much hope. However, given the known impact on international visitor numbers and revenues due to covid-19 there is some reason to hope for a reprieve, at least until such times as international tourism in to the UK begins to, or has fully recovered.

Of potentially interest to all destinations will be news that in settling its own tax affairs with HMRC Airbnb has agreed to hand over detail of income of approach quarter of a million UK hosts for the 2017-18 and 2018-19 tax years. I assume but don’t know for absolute certain that this will now be an ongoing arrangement? 

HMRC are not pursuing an aggressive line on this but are simply saying, “We would encourage customers to check their tax affairs, seeking advice where necessary, in order to put right any honest mistakes or omissions”. Tax payers have in any case until 31 January to amend their 2018-19 returns.  For the time being at least, corrected errors or omissions are likely to attract little or no additional penalty.  HMRC can charge between 0 and 100% of the unpaid tax and interest on top of the tax itself as a penalty dependant on the circumstance and the degree of carelessness, deliberate action or culpable fraudulent intent. In the case of fraud HMRC can decide to launch an investigation, allowing them to look in detail at all tax affairs and recover unpaid funds back over a maximum period of 20 years. For some, simply having to pay outstanding tax and amend future working practices will be a major penalty in its own right.

Assuming that the anecdotal evidence that under reporting of taxable gains is wide spread, Airbnb’s cooperation could be a game changing event, helping to level an alleged, significant financial disparity between traditional accommodation providers and sharing economy platform-based providers. Importantly it could also further strengthen the arguments being made for similar access to operational information for other authorities charged with enforcing planning and fire and other basic consumer safety checks, whether that is through disclosure from the platform providers or via some form of robust accommodation provider’s registration scheme. 

In order to help the process destination managers may, now or in due course, wish to make sure that news of the Airbnb HMRC arrangements is widely publicised in their areas so that Airbnb host have the opportunity to check their tax status now well before HMRC start to take a more robust stance, as doubtless they eventually will. A typical, free access example of recent coverage is at: https://inews.co.uk/news/business/airbnb-tax-deal-hosts-hmrc-tax-glare-company-probe-696150

I send out more confirmed detail when I have it.