Mayors Set to Gain Powers to Introduce ‘Tourist Tax’ on Overnight Stays

Mayors across England are set to gain new powers to introduce an overnight visitor levy on people staying in hotels, guesthouses, holiday lets and other short-term accommodation, in a move that has prompted concern across the hospitality industry.

The Government’s plans would give Mayoral Strategic Authorities the discretion to introduce a locally determined charge on overnight stays, with the money raised intended to support investment in areas such as transport, infrastructure and the visitor economy.

The precise design of the levy is still being finalised. However, the Government has proposed a system that could allow charges to be calculated as a percentage of accommodation costs rather than simply applying a flat fee.

Ministers argue that giving local leaders control over the policy would allow individual areas to determine whether a levy is appropriate for their circumstances, as well as how any revenue should be used.

The Government has previously said the measure is intended to give English mayors greater financial powers and bring the country closer to international tourist destinations where visitor levies are already established.

However, hospitality representatives have warned that allowing local authorities significant freedom over the level of the charge could create additional costs for businesses and visitors at a time when the sector continues to face considerable financial pressures.

The plans will price working families out of a British holiday, UKHospitality said.

The scope of the holiday tax is so wide that independent economic analysis that said it will cost 33,000 jobs, increase tax for holidaymakers by £1.6 billion and reduce GDP by £2.2 billion is now the bare minimum impact to be expected.

Allen Simpson, Chief Executive of UKHospitality, said: “The millions of families who will be forced to pay significantly more for their holiday will hardly be comforted by their money going to prop up local government, when they’re struggling to make ends meet.

“The 33,000 people who could lose their jobs as a result of this tax, during an employment crisis, will be rightly furious.

“In a week when the Government has talked about growth, cutting red tape, getting people back into work and supporting hospitality, it is set to announce yet another tax that will do the absolute opposite.

“Give Mayors one tax-raising power on one sector and they will pull that lever until it snaps. You just need to look at the long list of Mayors already lining up to do just that.

“The Government claims this tax is normal. It’s not. There are scant examples of a destination with our 20% level of VAT and a holiday tax, for a reason. If it wants to use that argument, it should practice what it preaches and lower hospitality VAT to 10%, in line with Europe.

“It’s now more important than ever that the Budget reduces hospitality’s costs, given the holiday tax is set to increase them once again. Tinkering around the edges is not enough. There has to be a substantial reduction in hospitality’s tax burden next month. Cut VAT, fix business rates and reduce NICs.”