Caithness, Sutherland and Easter Ross Jamie Stone urged Chancellor of the Exchequer Rachel Reeves to consider making controversial tourism levy to be VAT exempt if it goes ahead
A Highland MP has called for a controversial tourism levy to be exempt from Value Added Tax (VAT) if it is introduced.
MP for Caithness, Sutherland and Easter Ross Jamie Stone has asked the Chancellor of the Exchequer Rachel Reeves to zero-rate any potential tourism levy.
The Visitor Levy (Scotland) Act 2024 was passed by the Scottish Parliament last May and gives local authorities the power to introduce a visitor levy in their area for tourists staying in overnight accommodation, with the aim of generating revenue specifically for the benefit of the visitor economy.
The Highland Council is proposing a levy of 5 per cent on overnight accommodation and started the statutory public consultation on 15th November 2024.
The public consultation period is now closed — with a report anticipated to be consulted at a future meeting of the Highland Council.
While the Highland Council has outlined how revenue raised from the visitor levy will allow for investment into public services and infrastructure, concerns have been raised over the negative impact this could have on local residents and businesses.
Locals have voiced concerns that the visitor levy will drive tourists away, as well as inhibiting Highland residents from travelling within the region, if an overnight stay is needed.
There are also concerns that the visitor levy will have a significant impact on accommodation providers who face the risk of being pushed over the VAT threshold or into a higher VAT threshold, forcing them to charge more on all their services.
Addressing Chancellor Reeves, Mr Stone said: “Scottish councils now have the power to introduce a tourism levy.
“That has gone down extremely badly with the hospitality sector. In particular, they fear a tax on a tax—that would be VAT. Will the Government look at zero rating that in the event that a tourism levy is introduced?”
Ms Reeves replied: “I want to welcome tourists to Great Britain and Northern Ireland.
“That is why we are securing trade deals with countries around the world, showing that we as a country are open for business.
“In the end, it is up to the Scottish Government which additional taxes they introduce, but as with income tax, the SNP never takes the side of ordinary working people.”
Mr Stone said this potential scenario of a “tax on a tax” is felt as “appalling” to hospitality businesses.
He said: “I know how unpopular the prospect of a tourism levy is with hospitality businesses in the Highlands. Goodness knows times are already hard enough. Now this, on top of a rise in national insurance contributions.
“The thought of VAT being charged on top of a tourism levy, if it is introduced - a tax on a tax - appals these businesses.”
He added that he was disappointed that the Chancellor made no mention of the levy, failing to address the question.
VAT is currently a reserved matter for the UK Government and is not devolved to the Scottish Parliament.
“I was surprised and disappointed that the Chancellor either evaded or did not understand my question,” Mr Stone said.
“Our hospitality businesses are crucial - without them, we have so much less to offer tourists.
Mr Stone previously met with the Minister for Services, Small Business and Exports to discuss concerns about the impacts of the rate of VAT on the visitor economy in the Highlands, and the potential effects of a proposed visitor levy.
Mr Stone said the Minister assured him that he would look at the proposal and write back to him with his considerations.
Additionally, Mr Stone has written to the Highland Council urging them to mitigate the potential negative effects of the visitor levy on local residents and businesses.
In the letter, Mr Stone suggested that accommodation providers should be required to collect the levy on behalf of the council but maintain the funds in a separate account distinct from their business income. This would enable them to complete an annual return and remit the levy directly to Highland Council.