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Category: October 2020

Airbnb Gives Landlord Details to HMRC

It was only ever going to be a matter of time before the taxman got his claws into Airbnb. After all, eBay sellers have been on his radar for years. Well, now it’s time for professional and ad hoc Airbnb hosts to cough up too. 

That’s because, as part of a deal with the online letting giant, the UK Treasury was given the names of 225,000 Airbnb hosts. The company itself was also forced to hand over £1.8m in tax fees. That’s in addition to the £5.6m it declared as tax for 2019. 

Many Airbnb landlords won’t have to pay tax

Not all Airbnb hosts will be due to pay tax on their earnings. Some may fall within the Rent a Room category, for instance, and where it’s possible to earn up to £7,500 without having to be pay tax. Airbnb itself says the majority of its users earn around just £3,100 a year.

For those that may exceed the threshold, HMRC say they will go back at least a couple of years. That means looking through the records for the tax years 2017-18 and 2018-2019.  

Many tax analysts are recommending hosts eligible for tax ‘own up now.’ That way they could avoid further fees, such as interest and penalties for late payment since HMRC may possibly take this ‘quick rectification’ into account.

HMRC can investigate up to two decades of accounts

HMRC can, in fact, investigate tan individual’s tax/business accounts for the past four years if it believes an ‘innocent error’ was made. For a ‘careless’ declaration’ it will go back six years. For international affairs it can be 12 years for an ‘innocent mistake’ and 20 years for ‘failure to notify.’ Deliberate acts of underpayment can result in criminal action being taken.

A spokesman for HMRC said: “People with additional income streams may not be fully aware of their tax obligations and so we have taken steps in HMRC to consider sectors, such as short-term property letting, where we may not be collecting the full amount of tax owed.”

He added: “We would encourage customers to check their tax affairs, seeking advice where necessary, in order to put right any honest mistakes or omissions.” 

Airbnb landlords may be charged business rates

Those that don’t have to pay tax on their Airbnb earnings may have to look out for being charged Business Rates, however. These apply in England, Scotland and Wales if property is rented out for at least 140 days a year. These are based on number of beds available and overall size of the property, as well as its location. 

Other exemptions for Airbnb tax include:

  • Rental income for the year is less than £1000
  • Total income for the year – including employment – falling below the Personal Allowance (£12,500 for 2020/21)

Airbnb and other ad hoc landlords not familiar with the tax structure of property are always advised to contact an accountant specialising in the subject for further clarification. 

John Lewis Diversifying into Build to Rent Apartments

Around 20 current closed John Lewis stores will become locations for the company’s brand-new contemporary Build to Rent (BTR) developments.

The popular retail giant is keen to diversity its business portfolio by moving into residential and affordable housing next year. This is as a direct result of falling profits for the past three years – to the extent, accountants at the firm are fully prepared to record a loss this financial year. 

John Lewis to make 40% of profits on housing and insurance

Spearheading the new strategy is chairwoman of the JL Partnership, Dame Sharon White. The former economist took over in March just before lockdown. She said her plans were for 40% of profits coming from housing and financial services by the end of the decade. By this she meant with John Lewis becoming a Build to Rent landlord and selling its own brand of housing insurance to tenants.

The firm’s retail arm will account for just 60% of planned future profits. Dame White has already pledged to spend £1bn spent on boosting online sales and refitting existing stores. The possibility of opening John Lewis garden centres is also being discussed. 

Two BTR planning applications for start of 2021

Two official planning applications for the change of use will be submitted at the start of next year for housing developments at John Lewis’ London stores. The New Build’s will mean some of the apartments will be sited both above, and beside, Waitrose supermarkets. That’s because JL Partnership also owns the supermarket chain.

When completed the Build to Rent apartments will be furnished with products from the John Lewis stores. The idea is tenants will also shop at the group’s Waitrose stores. 

A company spokesman said: “We’re a landlord already at three of our properties, so this is an obvious extension for us. And we’re now talking to developers and investors who can help us achieve our ambitions.” 

John Lewis has a total of 42 department stores, all of which were forced to close in spring and during the pandemic. Together with Waitrose, it employs up to 78,000 staff – although staff cuts are certainly on the horizon. 

John Lewis turn shop floors into office rental space

Executives have already started applying for a change of use regarding the group’s flagship store. They want to rent out three of the building’s floors as office space to rent.

And finally, the company is also about to ditch its famous ‘never knowingly undersold’ slogan. It will be replaced with ‘value for money’ – a more appropriate promise it feels, considering the current economy.

Dame White herself added: “We want to make John Lewis and Waitrose the ‘go to’ brands for customers who want quality, value and sustainability.”

She added that the group would share its success with “customers, partners and communities.” That “success” includes recording £400m profits by 2025.Meanwhile, John Lewis isn’t exactly going in to unchartered territory. Another home furnisher – this time Swedish giant Ikea – has already pledged to build affordable housing, in Worthing. It had commissioned Swedish property developer BoKlok to build 162 flats prior to lockdown

Property Market Continues to Smash Records

UK House prices hit a record high last month as the move by inner city dwellers to get to greener pastures continues.

Property portal Rightmove’s latest House Price Index recorded a national average asking price of £323,530 per property. That’s a 5.5% increase (£16,818) on the figure for the same time last year.

The stunning statistics, considering the current circumstances surrounding the coronavirus pandemic, has prompted Rightmove forecasters to predict a 7% rise in property values for 2020. They had previously put the figure at 2%.

A number of property records ‘smashed’

But it’s not just property prices that are ‘up’ – the number of properties sold per estate agent is also impressive. To the extent that last month 70% more houses sold than in September 2019.

And property is selling faster too. The average house or apartment is now taking just 50 days to swap hands – compared to 62 days.

It doesn’t look as if the situation is going to quieten down any time soon either, despite the run-up to the winter months. The number of active buyers compared to last year is down only 1% to 66% from its peak in July of 67%.

Even Rightmove are declaring records of their own for the portal – with a huge surge in traffic. They say the number of online visitors to their site was 50% higher than September last year. That’s the highest annual jump since way back in 2006.

But, Property Data Director of Rightmove Tim Bannister warned house sellers not to get too carried away with their asking price. That’s because the sheer volume of house sales has created a backlog and that may mean many transactions not going through before the end of the Stamp Duty Holiday deadline. As a result, some sales may fall through as buyers, losing thousands of pounds, may refuse to pay the higher property prices being asked.

The number of buyers potentially trapped in this property bottleneck could be as high as 200,000 according to online property consultancy TwentyCi.

Bannister added: “Whilst activity levels continue to amaze there are some signs of momentum easing off from these unprecedented levels.”

Estate agents say low mortgage interest rates has also helped fuel demand – to the extent there are currently more buyers than sellers.

Most sales have taken place in what Rightmove refers to as ‘top of the ladder’ properties. These are homes worth more than £500,000 with a minimum three to four bedrooms and where buyers will benefit from up to £15,000 in Stamp Duty savings.

Upmarket estate agency Savills say sales for around 868 properties worth £1 million upwards, have gone through on a weekly basis since June 1. These are mostly for rural areas, with the Cotswolds recording a 94% increase in sales since June this year.

London though is losing out on interest from foreign buyers. Interest in the city centre and other expensive areas has fallen since travel restrictions were introduced during the summer months. And yet, the capital has sold 4% more upmarket properties than at this point the previous year.

Vendor Finance

The magic bullet to substantially increase your deal leverage

I often find that vendor finance is at once under-utilised and the Holy Grail. It’s crazy how many times complicated or protracted financial tools are used where a simple vendor finance mechanism would be the obvious choice. I guess people avoid it because they think it’s a tough negotiation or that the vendor will flat out reject it.

I use vendor finance – or at least an element of it – all the time when buying properties, businesses… anything really! It’s almost like your way of enforcing warranties should something go wrong or just differently to how you anticipated it. The trouble is, in the property world it’s pretty much “what you see is what you get” – but this isn’t always the case. 

Purchase lease options

Anyone who’s familiar with me in the property arena will know me for my work using property options and purchase lease options. This is where you agree an option (not a deferred completion) to purchase a property at any time within a specified timeframe. Then, with a lease option, you agree to lease the property during this time, so that you can make use of it whilst you wait to purchase it. If carried out correctly – and legally – this can give you all the benefits of ownership without strictly owning the property. For example, you can benefit from rental profits as well as any appreciation of the value of the property because you will buy it for the pre-agreed amount, even if the property is worth more when you come to exercise your right to purchase. 

I’ve made a lot of money using these methods, but you must be careful. Whilst this is a financial tool touted as a way to get into property with little money and experience by many of the gurus out there, it’s actually an advanced purchase mechanism that requires some degree of property knowledge, skill and business acumen to get right; yes, you’re benefiting from the perks of ownership, but you need to bear in mind that you’ll also have all the responsibilities of ownership… 

Private mortgages

This is another method that I’ve had success with in the past. Whilst similar in nature to purchase lease options, private finance – or more commonly referred to as private mortgages (one form of vendor finance) – is where the seller becomes your ‘mortgage company’, allowing you to pay off the purchase price over time. This works particularly well when buying from corporate entities, even better when the transaction is for a commercial property.

It can also be a great way to push struggling deals over the line if the finance you’ve arranged falls short, or if there are legal or planning issues you need resolved that can’t be sorted pre-completion. Saying, “let’s put this last £150,000 of the purchase price into a vendor finance arrangement where I pay you X amount per month over three years, that way we can complete…” can be a very powerful thing. Maybe even say to the seller: “imagine the monthly payments as a kind of deferred income – take a break from work and go on holiday for six months…”

Another great way to use this method is to get better rates on finance, as refinance tends to be easier and somewhat cheaper than arranging purchase finance. So, for example, why not put the property in the buyer’s name with zero payment, but agree to a vendor finance arrangement with the seller and make interest-only payments to them, with them having a charge over the property, until you can refinance. This then pays the seller off in full. Of course, in this situation it would require the property to be unencumbered (have no mortgage), but your creativity here is the only limitation.

How to find these deals

Direct-to-vendor is usually the key. When I was more active in property before becoming a lender, I would spend anywhere between £1,000 and £2,000 per month on advertising directly to individuals who were looking to sell their property, but hadn’t yet approached estate agents. You can do this in a variety of ways, Facebook, Google, industry media, even bandit boards… again – how far does your creativity stretch? 

Vendor finance is such a handy thing to have in your toolbox. I wouldn’t rely on it solely to execute deals, but it can certainly hammer out troublesome properties or give you the leverage you never thought you could have. 


The author is not an accountant or finance professional. You should always discuss your personal circumstances with an accredited finance professional

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