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Airbnb has drawn criticism from the likes of the Bed and Breakfast Association over lack of requirement for hotel-standard fire protection.
Airbnb has drawn criticism from the likes of the Bed and Breakfast Association over lack of requirement for hotel-standard fire protection. Photograph: Alamy Stock Photo
Airbnb has drawn criticism from the likes of the Bed and Breakfast Association over lack of requirement for hotel-standard fire protection. Photograph: Alamy Stock Photo

Tax, not tech, gives Airbnb advantages in UK

This article is more than 7 years old

One third of savings offered to customers on London accommodation comes from having lower tax bill than traditional hotels

Airbnb may be known for offering frugal travellers savings over traditional hotels, but a new investigation reveals that a lot of the savings the company can offer in the UK come not from fancy technology, but tax advantages.

According to the Financial Times, around one third of the savings the company offers customers on accommodation in London comes from having a lower tax bill.

Where a traditional hotel has to pay expensive business rates on its property, and charge VAT on the entire cost of its stay, individuals and small businesses who let out rooms on Airbnb have a much lighter taxation regime: the service only charges VAT on its service fees, not on the bulk of the cash transferred from guest to host, and homeowners are recipients of a number of tax breaks aimed at encouraging them to take on lodgers. Larger UK businesses are also levied VAT, but only when their revenue tops £83,000, something only the largest Airbnb hosts achieve.

The average hotel room price included $41.30 (£33.60) a night in tax, according to the FT’s figures, whereas the average Airbnb stay was just $8.40. That difference would account for a third of the difference between the typical hotel cost and Airbnb room.

In a statement given to the FT, Airbnb said “The overwhelming amount of money generated by the Airbnb platform stays with hosts and their communities. The Airbnb model is unique and empowers regular people, boosts local communities and is subject to local tax. It also makes Airbnb fundamentally different to hotel groups and companies that take large sums of money out of the places they do business.”

Airbnb has faced criticism from competitors for the laissez-faire attitude with which it treats hosts. The Bed and Breakfast Association has attacked the company for not requiring hotel-standard fire protection (it does not require hosts to fit smoke alarms, for instance, nor oblige them to document emergency exits).

From spring 2017, Airbnb is to introduce at least one new regulation for its users, requiring them to comply with UK laws that limit the period of time a home can be let out to 90 days in one year unless council permission is granted. Previously, Airbnb had required councils to independently enforce the laws, even though it held the data required to prove breaches.

“We want to help ensure that home-sharing grows responsibly and sustainably, and makes London’s communities stronger,” the company said when it introduced the change. “That is why we are introducing a change to our platform that will create new and automated limits to help ensure that entire home listings in London are not shared for more than 90 days a year, unless hosts confirm that they have permission to share their space more frequently.”

The enforcement won’t come cheap. The Financial Times estimates the company could lose out on $400m worth of bookings a year through implementing the limit. Airbnb in a statement said, “the analysis by the Financial Times is wrong and is based on false data and flawed methodology”.

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