Statutory cap on Overnight Visitor Levy rates needed to help hospitality businesses with regional cost variations
A statutory cap on Overnight Visitor Levy rates is needed to help hospitality businesses with regional cost variations, tax and business advisory firm, Blick Rothenberg.
Elisa Sofocli, a partner at the firm, said: “It has been confirmed that mayors in England will now be able to bring in an Overnight Visitor Levy as a percentage of the cost of accommodation. The government expects local leaders to set a proportionate rate, but without a statutory rate cap, businesses cannot know what the eventual landscape will look like.”
She added: “The big question for hospitality businesses is how much variation there will be between different parts of England. For operators working across multiple regions, that uncertainty makes financial planning more difficult. A rate cap would mean they at least know where the ceiling is when budgeting for levy costs.”
Elisa said: “For a hotel group or accommodation provider operating across several regions, this isn’t simply another percentage added to a bill. They could be dealing with different rates, exemptions, effective dates and reporting requirements. Businesses will need to understand not just what they are charging, but how the levy feeds through their booking, accounting and pricing systems.”
She added: “The message coming through from hospitality is clear, whatever model is introduced, businesses want it to be simple. Flexibility for individual mayors is understandable, but if that translates into different rates, exemptions, rules and reporting requirements from one region to another, the compliance burden could quickly become much greater than the headline percentage suggests.”
Elisa said: “VAT is another important part of the picture. Accommodation providers will also need to consider the interaction with VAT. If room prices increase to absorb the cost of the levy, VAT will apply to the higher accommodation charge, potentially increasing the overall cost for guests beyond the headline levy itself.”
She added: “There is a difficult balance between raising revenue from visitors and maintaining competitiveness. Tourism is price-sensitive, and England will be competing not only with overseas destinations but with neighbouring English regions. If two otherwise similar destinations have materially different accommodation costs, visitors may factor that into where they choose to stay.”
Elisa said: “The strongest argument for a visitor levy is that people who benefit from a destination should contribute towards the infrastructure and services that support tourism. But that also creates an expectation that visitors and businesses will want to see where the money goes. If revenues are not visibly reinvested in transport, infrastructure, attractions or the visitor economy, the case for the levy becomes harder to demonstrate.”