Airbnb paid UK tax of £317,000 last year after its London company handled hundreds of millions of pounds in global rent payments which generated commissions for its Irish HQ.
The UK arms of the booming home sharing website paid tax on a £1.4m profit for the 11 months ending in December 2015, their first full UK accounts reveal. One of the companies handled such a large amount of rental cash that at one point it held £430m on account.
Airbnb Payments UK Ltd handles the full rental payments between guests staying everywhere in the world except the USA, China and India and their hosts. London is Airbnb’s third biggest city worldwide behind Paris and New York, with approximately 40,000 properties to rent.
Airbnb generates the bulk of its income from commissions worth up to 15.5% of rents but these are accounted for by its company in Ireland, where it benefits from a favourable corporate tax regime.
The San Francisco based business has been valued at £23bn and tax campaigners have questioned its financial arrangements, although Airbnb denies the set up allows it to avoid paying its fair share of UK tax.
Tax barrister, Jolyon Maugham QC, said: “This is the same story as Google and Facebook which is that profits generated from the UK are not taxed in the UK. By using a company in a lower tax country, in this case Ireland, Airbnb looks to have arranged its affairs to avoid tax throughout Europe including the UK.”
A spokesman for Airbnb said: “We don’t make important, long-term business decisions on the basis of taxation”.
“We follow the rules and pay all the tax we owe in the places we do business,” he said. “Corporation tax is a tax on profit, and Airbnb is a young company investing heavily in our future. Airbnb hosts keep 97% of the price they charge to rent their space and the overwhelming amount of money generated by the Airbnb platform stays with hosts and their communities.”
Airbnb was established in 2008 and is now backed by multiple venture capital firms including Google Capital. It claims to have more than two million properties available to rent in 191 countries.
Airbnb’s UK tax payments were detailed in annual reports filed last month by its two British subsidiaries and provide a rare snapshot of the scale of its booming business.
Airbnb has two UK firms to handle payments from around the world and conduct marketing in the UK. While hundreds of millions of pounds in rental payments pass through the companies, earning commission from both the guest and the host, Airbnb’s UK arms recorded £145m as turnover in the UK, of which just £1.4m was taxable profit.
The biggest cost recorded was a £100m foreign exchange loss caused by Airbnb receiving cash for rentals in multiple currencies and delays, sometimes of several months, between receiving payment from a guest and paying it out to a host.
Airbnb said the UK company processes payments from customers around the world on behalf of its Irish HQ. The “significant costs” of that process – such as any foreign exchanges losses – are reimbursed by Ireland at a profit which is then taxed in the UK, it said.
Airbnb said that its international HQ was based in Ireland to “capitalise on Ireland’s global reputation for technology and utilise the vast tech-savvy and bilingual workforce that Ireland has built.”
But Richard Murphy, a chartered account and director of Tax Research UK, said he thought Airbnb was “dumping its foreign exchange losses in this country to get tax relief on them but the income to which these foreign exchange losses relate never comes near the UK”.
“We get none of the upside on tax from Airbnb’s real income, which is taxed in Ireland, but are giving away tax relief on their costs,” he said. “The net result is to significantly increase the overall level of profits Airbnb can enjoy at low tax rates.”
Murphy said cost reimbursem*nt “is not the basis on which international tax rules are meant to work”.
“They are meant to ensure businesses are taxed on a commercial basis. It is not clear that the UK is ensuring that is happening and in the process Airbnb may be winning from our failure.”
Airbnb said this was untrue and its UK arm is taxed on a commercial basis and that cost reimbursem*nt is a common way of doing business.
The accounts also reveal that Airbnb believes “future legislation may negatively impact Airbnb’s ability to operate as it currently does”.
It states: “The sharing economy in which Airbnb operates is a relatively new economic sector and currently the status of legislation governing it can be vague at best.”
