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To tax or not to tax – the Scottish visitor levy dilemma…

18 August 2023
In May 2023, the Scottish Government introduced the Visitor Levy (Scotland) Bill to the Scottish Parliament. If passed as legislation, this will permit local councils to add tax to overnight accommodation. Commonly known as a "tourist tax", this concept operates in countries such as France, Germany and Italy. 

It is the middle of August and the Edinburgh festivals are in full flow with the central belt of Scotland and beyond brimming with visitors from day-trippers to those spending a number of weeks in Scotland. Now is a good time to consider the proposed visitor levy currently before the Local Government, Housing and Planning Committee of the Scottish Parliament.

Unsurprisingly, Edinburgh City Council has already put forward its proposal to introduce the tax at a flat rate of £2 per night for the first week of any visitor stay.

It is important to note that local councils will have discretion as to whether they wish to introduce this levy and, if they choose to, they will have the power to determine the local rate. The Bill, however, requires consultation with local communities, businesses and tourism organisations before introducing the levy in the area.

Whilst Edinburgh has proposed a flat rate of levy, the Bill suggests basing the levy on a percentage of accommodation costs, with the revenue created reinvested into the local community to improve services and facilities used by visitors in that area. There is no specific definition of 'services and facilities' but the explanatory notes do provide examples: the building of a visitor centre or improvement of transport links to an area popular with visitors to the area.

Under the proposed legislation, the "liable person" responsible for paying the levy is the person who:

  • provides overnight accommodation to a visitor; and
  • is the occupier of the premises at which the overnight accommodation is provided.

Overnight accommodation is widely defined and includes hotels, self-catering accommodation, B&B's, guest houses, room lets, caravan parks, campsites, boat moorings and fixed vehicle or vessel accommodation. 

The providers of the overnight accommodation will be required to collect the levy from guests and then make a return and payment of the levy to their local council (likely to be on a quarterly basis).

Additionally, the liable person is responsible for keeping accurate, up-to-date records of levy payments collectedwhich must be retained for 5 years. Failure to complete the return and make payment may result in penalties being imposed by the relevant local authority.

Each local authority implementing the levy has the power to specify the form and content of the return.

Many in the hard hit hospitality sector will argue this may prove to the final straw for some businesses who don't have the capacity to take on further compliance obligations and understand further regulation.

In areas with high visitor footfall, the introduction of a visitor levy arguably has the potential to provide funds for essential projects to improve visitor experience. The challenge will be ensuring councils (themselves separate political bodies with diverse agendas) are consistent in their compliance approach. Otherwise, the costs are likely to outweigh the benefits of introducing this tax.

The Bill is still subject to changes, so now is a good time to raise any concerns with your local MSP.

If you have any questions arising from the above, or would like to understand how this may affect your business, please contact Caroline Colliston or your usual DWF contact.

We would like to acknowledge Katrina Hall's contribution to this article.


Further Reading