A professional and trustworthy accountant forms the backbone of any business. While we operate in the industry of hospitality (i.e., of “people”), you’ll go much farther by understanding that your Short Term Lets empire is a numbers game.
For those of you who want to scale, I cannot stress how important it is to work with an accountant who understands the nature of your business. Trust me. You’ll save money, headache and a shed load of time.
We all know that accounting is the most important department in any business, and in this post, we will discuss accounting in our great short term rental and serviced accommodation industry.
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The Growth of Short Term Lets Industry
No longer a “flakey concept” that involves the casual exchange of makeshift rooms for cash, the business of short term rentals is becoming seriously popular and lucrative.
Driven by enormous marketplaces such as Airbnb, the industry’s certainly attracted HMRC’s attention over the years – making it more important than ever for you to operate compliantly.
An accountant specialising in the industry will help you work through all the logistics of short term rentals. Whether you’re thinking about renting out on booking platforms, leasing out an investment property during peak holiday periods, or otherwise leveraging your short term rentals to make money and save on taxes – a specialist accountant will help you understand changing rules and regulations (which will differ from country to country).
Accounting in Short Term Lets – Breaking Down the Basics
Like any equation, what seems complex at first needs to be broken down into smaller chunks in order to be understood.
An excellent short term rentals accountant won’t try and confuse you with jargon; and will rather talk you through the basics and seamlessly crunch the numbers of your short term rental empire.
For example, one of the main things a reliable short term rental accountant will confirm with you is whether you’re doing business with guests or tenants.
A tenant is considered to be a person entitled to exclusive possession of the premises for a defined period (in exchange for the payment of rent) – under what’s known as a Landlord and Tenancy Arrangement. Your short term rental accountant will realise that income from this arrangement is subject to Income Tax under the regular income tax rules.
However, a person who occupies a property as a short term rental guest doesn’t generally enjoy “exclusive” possession of the property. This doesn’t fall under the standard rental income tax rules.
Understanding Different Tax Implications (for Guests)
Income generated from short term accommodation is always subject to income tax. Once again, your accountant will know of all the “case terms”,; but in simple English, this basically translates as “trading income” or “other income”.
As you’ll already know, the main sources of short term serviced accommodation are hotels, guesthouses, B&Bs, holiday homes, and Airbnb. However, there are different tax implications with regards to available deductions, reliefs etc., and this is where the knowledge of an industry-specific accountant is frankly invaluable.
Avoiding Costly Mistakes
Poor accountants have been tarred with the same bleak paintbrush for decades. However, a trustworthy accountant who specialises in short term rentals will offer you so much more than technical definitions and numerical jargon.
These days, the savviest short term rentals accountants actively “jump in” to help clients remain up-to-date on tax and licensing requirements; and, most importantly, what mistakes to avoid.
- Property management and real estate services can present significant risks if you’re not clued up enough. A reliable STR accountant will look out for pitfalls and protect you from hidden tax liability and operational problems.
- As an STR operator, it’s integral for you to research the market and pricing of similar properties. A short term rental accountant can help you here by assisting with the creation of a Yearly Calendar and setting rates based on market research.
- Short term renting (even if it’s just one property) really is a fast-paced business with numerous moving elements. Your STR accountant can assist you with additional tasks – with specific tools – including collecting funds, damage deposits/ insurance, rental agreements and so forth.
- The average property owner is simply unaware of many administrative responsibilities and regulations; your accountant’s knowledge will be like gold dust here. Remember, failing to get the paperwork right can create serious friction in your business.
Summary
While the above isn’t intended to overwhelm, I hope it reaffirms how important it is for you to work with an accountant who specialises in short term rentals.
We work in a very fluid, fast-moving and regularly changing industry, and a failure to keep your books in check (even if unintentionally so) could be the difference between scaling or just about managing to stay afloat.
For more guidance, tips and advice about the logistics of running a successful short term rental company, join my closed Facebook Group to get the latest insights and trends,
There may also be a few spots left in our property coaching club, Room 22, where we invite experts from all areas of the short term rental world to share their expertise with you.
In the meantime, keep building and bettering.
