A tourist tax must work for Yorkshire, not against it - Laura Duggan

That discussion has moved on considerably. The Government confirmed plans to bring in legislation to allow local leaders the power to introduce an Overnight Visitor Levy; essentially an additional charge on hotel rooms, B&Bs, holiday lets and other overnight accommodation. The levy will be calculated as a percentage of the cost of a stay rather than a flat fee, with local leaders deciding whether to introduce it and where the money should be spent.

Here in Yorkshire, the conversation was already well under way. A report commissioned by Mayor of York and North Yorkshire David Skaith recently proposed a £1-a-night levy for York and North Yorkshire, estimating it could raise as much as £26m for the region. That proposal predates the Governments’ confirmation that the new levy would instead be calculated as a percentage of the accommodation cost, meaning the precise shape of any Yorkshire scheme will now need to be considered within that framework.

West Yorkshire Mayor Tracy Brabin has welcomed the new powers, while David Skaith has said no decision will be made without further consultation with hospitality and tourism businesses.

There is a legitimate case for asking visitors to contribute towards the places they come to enjoy. Yorkshire’s tourism economy depends on well-maintained town centres, reliable transport, public spaces, cultural attractions and infrastructure, which all require maintenance to ensure destinations can cope with millions of visitors each year.

A modest contribution, clearly reinvested into those essentials, could benefit visitors and businesses alike. The concern is what happens if another charge is added to the cost of an overnight stay, particularly when Yorkshire’s hospitality industry is already operating in a high-tax, high-cost environment.

The UK applies VAT at 20 per cent to hotel accommodation, compared with rates of 10 per cent or below in countries including Germany, France and Spain

Under the proposed model, VAT would also apply to the accommodation price inclusive of the levy, adding another consideration for businesses when assessing the impact. In practice, the additional cost is likely to be reflected in the price visitors pay, affecting families heading to the Yorkshire coast, couples booking a weekend in York or Harrogate, and people travelling to Leeds or Sheffield for concerts, sporting events and celebrations.

For hospitality businesses, the concern is how higher overall costs for visitors could affect demand. Independent hotels, guesthouses and B&Bs are fundamental to Yorkshire’s visitor economy. Many have spent recent years absorbing higher wages, National Insurance, business rates and other operating costs while trying to keep prices attractive and rebuild margins.

A new levy also creates another administrative responsibility. Larger hotel groups may have dedicated finance functions to manage collection, reporting and payment. For an independent operator, those same requirements can take time directly away from running the business.

That is why getting the details right will be crucial for Yorkshire. Visitor levies should not make the region less attractive to visitors or place unnecessary pressure on the businesses that welcome them. Any charge needs to be modest and predictable, giving hotels, guesthouses and other accommodation providers the certainty they need to set prices, plan ahead and invest with confidence. Businesses will also want safeguards to ensure that a modest levy at the outset does not become a significantly higher charge in years to come.

There must also be complete transparency over where the money goes. If visitors are being asked to pay more and accommodation businesses are being asked to collect it, the benefits should be visible. Revenue raised through Yorkshire’s visitor economy should return to the transport, infrastructure, attractions and public spaces that help sustain it.

Most importantly, hospitality businesses need a meaningful role in shaping the final system. They understand how visitors spend, where pressure points exist and how even small changes in price can affect demand.

A well-designed levy could provide investment that makes Yorkshire an even stronger place to visit. A poorly designed one risks increasing costs for visitors while adding complexity and administrative burden for businesses. A tourist tax will only command support if it earns it. If the levy asks more of Yorkshire’s visitors and hospitality sector, it must give something tangible back in return.

Laura Duggan is a tax partner at Xeinadin.