Councils are in advanced talks with the Secretary of State, Sajid Javid, under the Sustainable Communities Act, which allows communities and councils to put forward ideas to government to solve local problems, to introduce a ‘tourist bed tax’ – an extra charge for staying at a hotel or B&B, on top of the basic room rate and VAT charge, in order to generate extra cash.
Councillor Charles Gerrish of Bath and North East Somerset leading the calls for the levy confirmed “the Council has recently started to discuss the matter again with the Government, and is exploring the feasibility with other local authorities.”
But business rates bills for hotels across England are already set to rise by a staggering £798million under the new tax regime due to come into force on 1st April, according to CVS Business Rent & Rates Specialists.
By 2020, all Councils will be funded by 100% retention of the business rates that they collect.
The hike in business rates alone could lead to the average room rate for short breaks, holidays and business trips in England rising by £5 per night on average, warn experts.
A detailed analysis from CVS shows that new Rateable Values across the hotel sector in England have increased by £315.69million.
Their analysis shows that the 6,764 hotels liable for rates in England had a combined Rateable Value of £1.34billion based on the last property assessment in 2010, which has formed the basis of rates bills for the last 7 years, but this has increased by 23.32% to £1.66billion.
As a result, CVS project that the amount payable under the new Rateable Values averaged out over the next 5 years across the hotel sector represents a £159.62million per year increase in tax.
Hotels in England previously paid between them £681.18million in rates for 2016/17, which is set to increase over the next 5 years to £840.80million per year on average, even allowing for the differing transitional relief caps and forecasted inflation.
Mark Rigby, Chief Executive at CVS, said:
“Rates bills are now landing on business’ doormats, and hotels in particular are becoming increasingly concerned by the level of tax increases they’re set to face in some two weeks’ time. The question is, could this lead to higher room rates, as it will be difficult for the cost to be absorbed long-term?
“On the one hand, these increases are a sign that the hotel sector has been in rude health over the past seven years. However, such a drastic rises in business rates could also leave small independent owned hotels squeezed and – in severe cases – at risk of closure.
“It’s disheartening to see that the budget-friendly hotels, those with a 3 star rating and which aren’t operating as part of a chain will be disproportionately affected.”
In 2014 a group of 19 Councils backed a similar move to introduce a so-called “Tesco tax” on big retailers in order to raise up to £400m a year, which the Government rejected.