Her Majesty's Revenue and Customs (HMRC) has warned home rentals site Airbnb UK that a tax inquiry it is conducting could lead to legal proceedings.
According to a note in newly filed accounts for Airbnb UK, HMRC has contacted the company regarding "tax laws or regulations impacting the company's business".
The note added: "The company is also subject to tax inquiries and proceedings concerning its operations and intra-company transactions. Some of these matters may result in litigation."
The San Francisco-based company operates two entities in the UK, Airbnb UK, which markets and supports the business, and Airbnb Payments UK, which processes payments between Airbnb hosts and guests outside the US, China and India.
In 2018, Airbnb UK made tax payments of £146,059 on profits of £455,076 and a £14.2 million turnover while Airbnb Payments UK had a turnover of $353.7 million (£273.2m), but it only made a $1.5m profit and paid tax of $303,823.
Airbnb released a statement saying: We follow the rules and pay all the tax we owe in the places we do business. That is true as rules apply today and will remain true for whatever rules apply in future. The Airbnb model is unique and boosted the UK economy by £4.2 billion last year alone."
"The vast majority of money generated on our platform stays with hosts and local communities, which makes Airbnb fundamentally different to companies that take large sums of money out of the places they do business. As with many other companies, these are routine checks and we are working closely with HMRC," the company added.
George Bull, senior tax partner at accountancy firm RSM, pointed out: "Nobody is saying that Airbnb has done anything wrong. The law is complicated, they have to decide how they are going to file their tax returns, they may do it on a basis that HMRC doesn't like. However, the phrase 'This may result in litigation' sounds quite serious. It sounds as though Airbnb is expecting a big tussle with HMRC to get these figures across the line."
