RENTING ROOMS ON Airbnb, selling your old household items online, advertising your bespoke city walking tours, letting out your parking space – the ‘sharing economy’ has opened up a new world of business opportunities for thousands of Irish people.
In 2017 the CSO asked internet users throughout the country if they had used any website or app to arrange accommodation (such as a room, apartment, house, holiday cottage, etc.) or transport service (such as car, etc) from another private individual in the previous 12 months.
31% of respondents said they arranged accommodation using this method while a further 23% said they had used a website or app to arrange a transport service from another private individual in the previous 12 months.
Technology companies worldwide are investing billions into platforms and apps that facilitate peer-to-peer sharing – think Uber and Etsy at the global end and marketplace and crowdfunding sites like Adverts.ie and Fundit.ie at the national end. The notion of the shared economy, and the trading of goods and services, ties in with popular social trends of reusing and recycling products, and with an overall increase in the awareness of the negative impact of excessive consumption patterns.
Platforms, websites and apps also synchronise beautifully with social media and digital social spaces, making it slick and easy to set up, get sharing and start earning.
Technology is facilitating grassroots business initiatives like never before, and Irish people are certainly getting their fair share of this financial pie. Recent statistics showed that Airbnb alone contributes roughly €200 million to the Irish economy per year, and that Irish hosts earned an average of €2,600 in 2015.
A recent figure from Parkingmotel.ie suggests that people living in Dublin can make up to €200 a month renting out their unused parking spaces. The options to earn some additional income are endless.
Any income earned is taxable
However, while the explosion of peer-to-peer business opportunities has brought about a whole new demographic of entrepreneur in Ireland, it has also created a whole new demographic of taxpayer.
Being in business means paying taxes on earnings. While some people who are earning via these schemes are aware of their tax obligations to varying degrees, many are completely oblivious of their tax obligation and the implications of non-compliance with Revenue.
It’s vital for hosts, providers and entrepreneurs to realise that any income earned is taxable. There is simply no getting around this. Revenue have been very engaged in trying to get this message across. Whether this business is a pastime, a hobby, a side-line, whatever you might want to call it, if you are earning income from the sharing income, you’ll need to declare it for tax.
Now, there are differing tax obligations depending on how much you’ve earned. If you’ve earned more than €5,000 a year (untaxed, net), you will need to register as a self-assessed individual by completing a Form TR 1. You’ll then need to file a Form 11 tax return and make a tax payment by 31 October each year for the previous year’s earnings.
For earnings of less than €5,000 a year, you’ll need to file a Form 12 tax return, with the same provision regarding dates and previous year’s earnings.
The prospect of filling a tax return is daunting for many people. However, there are a number of different ways to keep the process simple. The Taxback.com website provides lots of free advice and information on how to complete the process yourself.
Fear of the taxman
Many people are reticent to deal with Revenue. Our own Customer Sentiment Survey from 2017 found that fear of the taxman and the worry that they will end up owing money to Revenue was a strong reason why people did not pursue their tax refund or file their tax returns.
It’s worth noting on this point that individual circumstance plays a large part in any tax dealings, and if you have any doubt regarding your tax obligations, it’s always best to make contact and clarify to avoid any unwanted outcomes.
Finally, it’s important to remember that you can reduce the amount of tax that you pay on your sharing economy income by offsetting your expenses.
It’s also important to remember that while all income is taxable, not all income generated is classified as ‘business’, so it’s important to distinguish whether your activity is a hobby or a business.
While many people spend money on their hobbies, this cannot be claimed back – only businesses can claim expenses. Therefore, an important question to ask yourself is ‘are my expenses incurred wholly and exclusively for my trade?’
For those that satisfy this question, there are many expenses that you can claim for, depending on your activity. For example, we recently compiled a list of the most popular deductible expenses for Airbnb hosts, and found these included electricity, broadband, gas, host and cleaning fees.
Whatever your expenses or activity, it’s vital that you keep a detailed record of them and retain all receipts to account for your trading activity. This will be extremely helpful should the taxman ever come calling for an audit.
Barry Flanagan is director of tax at Taxback.com
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