Monday 19 December 2016 2:24 pm

Airbnb’s UK tax bill comes under scrutiny

Airbnb's tax bill has come under scrutiny after it paid £317,000 in UK tax, despite London being the third biggest city from which the company offers rental accommodation.

The tech business' international HQ is based in Ireland, but its payments division – Airbnb Payments UK – is based in London. This part of Airbnb handles the rental payments between hosts and guests outside of the US, China and India.

This arm of Airbnb paid tax on £1.4m profit for the 11 months to the end of December 2015, the company's accounts reveal.

However, most of Airbnb's income comes from the commissions it takes on the rents made by its hosts. This income is accounted for in Ireland, where the company is subject to a more favourable tax regime.

Airbnb has said the it does not make its long-term business decisions based on tax regimes, and that it has chosen Ireland for its international base because it is the home of several big technology companies.

Apple, Facebook and Google all have their European headquarters in Ireland, where the standard rate of corporation tax is 12 per cent. However, such arrangements have proved controversial.

Now, Apple is fighting a ruling from the European Union that says it received an illegal tax break from Ireland and must pay €13bn (£10.9bn) in back taxes, equivalent to all of Ireland's healthcare budget.

An Airbnb spokesperson said: "We follow the rules and pay all the tax we owe in the places we do businesses. Corporation tax is a tax on profit and Airbnb is a young company investing heavily in our future.

"Airbnb hosts keep 97 per cent 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."

Miles Dean, managing partner of Milestone International Tax, said: “This is not Airbnb plotting to avoid UK or other EU tax. All Airbnb is doing is delaying US tax by keeping profits in an Irish subsidiary. Airbnb is based in the US and most of its profit-generating activity is located there; it will ultimately pay most of its corporate taxes there.

"The problem is the US corporate tax rate, which is currently one of the highest in the world at 35%, with no dividend exemption. Therefore, a multitude of US businesses try to delay paying tax on their non-US profits by keeping them in foreign subsidiaries. It’s a problem that Mr Trump’s new administration plans to resolve, and does not concern the UK."