1

I helped a friend manage her property on Airbnb.

The Airbnb money went into my account, the costs came out of my account and I transferred to her 50% of the profit (keeping the other 50% for myself).

The total money into my account exceeded £85,000

My question is, is this +£85,000 contributing to my turnover limit for VAT or hers?

If it's hers then how do I figure out what my turnover was. If it is mine then, is that what all 'property managers' face when dealing with their client's money: their client's funds in and out contribute to their turnover and they could end up having to register for VAT?

  • I'd expect that rents are paid to the owner, and the owner pays the property manager. – RonJohn Sep 21 at 18:31
  • Because it appears to me that you're also acting as her bookkeeper. – RonJohn Sep 21 at 18:33
  • Hmm, if my memory serves me correctly I think I have been in situations where I have been the client of a property manager and they have done a similar process that I have. I might be wrong though as it was about 7 years ago. Does it matter either way? – Richard Brigstock Sep 21 at 18:41
  • In your current circumstance? No. (It might be simpler in the future for her to open a business account that you have access to. All money goes there and you take out expenses and your share of the profit. Not that it answers your current question...) – RonJohn Sep 21 at 18:45
  • Yes, in retrospect I should have separated everything. I didn't plan for this to have been as big/intensive as it was. I'm guessing you aren't able to comment on my current question? – Richard Brigstock Sep 21 at 18:48
3

Since the money is passing through your personal bank account it is your turnover.

Things might be different if the account was a business account owned by the property owner and if you were an employee. But that is not the case.

See an accountant if you need reliable advice. I run a business but am not an accountant, not a tax adviser.


Example definition

Turnover is the total sales generated by a business in a specific period. It’s sometimes referred to as gross revenue, or income. It’s different to profit, which is a measure of earnings.

Since OP manages the lettings and receives the rent into their own bank account, they are receiving this gross income. Their payment to the property owner is a cost item. In terms of cashflow their case is indistinguishable from that where the OP rents the property from the property owner and sublets the property to customers via Airbnb.

  • Do you have a reference for that? (that money passing through your bank account is your turnover) – GS - Apologise to Monica Sep 23 at 12:53
  • @Ganesh - I don't have any good references but see addendum to answer. – RedGrittyBrick Sep 23 at 13:07
  • Hmm, so now my doubt is about whether the tax follows the money or follows the legal obligations. If the money is just being held on behalf of someone else does it really matter where it was temporarily stored? – GS - Apologise to Monica Sep 23 at 22:21
  • @RedGrittyBrick thank you for your reply. I am willing to (sadly) accept this as being the case, at the same time, as Ganesh is also querying I guess I'm surprised. When estate agents receive money from a tenant which they then pass onto the landlord is this money also considered the estate agent's turnover? The way I saw it I was merely collecting rent monies on behalf of the landlord and transferring it to her minus the expenses and my 'fee'... I would have thought only my fee portion would be taxable for me as I do not 'own' the rest of the money. – Richard Brigstock Sep 24 at 16:17
  • @Richard, businesses are not taxed on turnover but on profits. You still have to declare turnover. Individuals are taxed on income but the turnover of your business is not your personal income (although I'd say it is definitely a mistake to pay it into your personal bank account and could lead to it being confused as your personal income) – RedGrittyBrick Sep 25 at 9:06

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