Other comments on taxation
169. The consultation paper explained that rental income is included in earnings, and is therefore, for Scottish residents, subject to Scottish Income Tax. Rental providers are responsible for declaring their earnings to HMRC. However, income tax reliefs and exemptions remain a reserved matter set by the UK Government and anyone letting a room under the Rent a Room Scheme on a short-term basis, or running a bed and breakfast or guest house, can receive up to £7,500 per year in rent without paying income tax. The final question in this section of the consultation paper asked,
Q15: 'Do you have any other comments on taxation relating to short-term lets?'
170. A total of 529 respondents commented at this question. The following table provides a breakdown of those who chose to respond.
Table 19: Q15
|Host with 1 property||106|
|Host with 2+ properties||65|
|Hotel / B&B owner||7|
|Other (non short-term let) landlord||10|
171. To a large extent, comments made in response to this question echoed themes from the previous three questions. The common theme across most sub-groups, and from a small minority of respondents, was that short-term lets should pay taxes in some shape or form. A small minority also felt that owners of short-term lets should pay higher rates of tax than at present; supported by higher numbers of affected residents. Examples given by respondents included tax rates of 40% of income created or double the council tax or non-domestic rates. It was felt this would help to raise money to contribute to local services such as road maintenance or the tourist infrastructure or that it would help to disincentivise short-term lets and keep more properties in the long-term rental or housing markets. A few respondents felt there should be no tax benefits or tax relief for short-term lets; supported most by hotels / B&Bs and affected residents. However, a similar number of respondents supported the status quo; and this position was adopted primarily by hosts of single and multiple properties.
172. Smaller numbers of respondents commented that:
- Short-term lets should be taxed in the same way as other businesses with liability for corporate gains tax, national insurance, VAT and rates.
- Taxation levels should not favour short-term lets over long-term lets and that the same regulatory and taxation system should apply to both.
- There should be a level playing field with the same system applied to all bed and breakfast properties, guesthouses, hotels and short-term lets.
- Local authorities and / or HMRC should enforce whatever system is applied to short-term lets. There were also comments from a small number of organisations of the need for cohesion between HMRC and local authorities as to whether short-term lets are a business or not. It was noted at an event that there will need to be a clear definition, given that there are various different thresholds for HMRC, Business Rates, VAT etc. One stakeholder suggested a starting point could be to harmonise these elements.
- Letting platforms should be used to help declare income from short-term lets and / or work alongside HMRC or local authorities to provide the necessary information.
- Revenue from any taxation should be used for local communities and local infrastructure.
- Any additional taxation for short-term lets would damage the tourist sector as well as making some businesses unviable.
- Tourists should play a role in contributing to the services used and supported a tourist tax or visitor levy. That said, a smaller number noted they did not support a tourist tax and noted a preference for businesses to pay additional rates. There were a small number of references to the separate Scottish Government consultation on whether local authorities should be allowed to levy a tourist tax. One organisation referred to the system adopted in Amsterdam where Airbnb manage the collection of a tourist tax through the online platform and suggested this could be adopted in Scotland.
- The need to treat rural areas differently as they have a shorter tourist season with a more limited capacity to earn income from short-term lets, in comparison to cities like Edinburgh or Glasgow where the tourist season is longer and offers greater opportunities for property owners to earn significantly higher sums of money through short-term lets.
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