The Mayor of London would control London’s overnight levy.

The government consultation proposes that a formal public consultation is undertaken by the Mayor prior to implementation of a levy (and periodically afterwards, if the rate or scope are amended). This would include consulting with those likely affected by the charge and the expenditure of any revenues, such as:

• Accommodation providers and industry bodies;
• Other relevant hospitality businesses and attractions;
• Tourism organisations and Local Visitor Economy Partnerships and other destination management bodies;
• Local residents and community groups;
• Visitors (where feasible); and
• Any further types of organisation set out in any subsequent guidance, or as deemed appropriate by the Mayor.

Consultation by the Mayor should take the form of a prospectus that includes:

• The area in which a levy will apply (if not the whole Strategic Authority area);
• The rate levied, including any variations
• Any exemptions
• What levy revenues are planned to be spent on
• Any revenue share for constituent authorities, where relevant
• Any further information set out in subsequent guidance, or as deemed appropriate by the Strategic Authority (the GLA in London).

The GLA would then publish a summary of the consultation results and its response, including a final prospectus, and an impact assessment, informed by the consultation. They may wish to revise the draft prospectus with respect to the findings from the consultation.

The Mayor would need to provide a minimum of twelve months’ notice for businesses and local authorities to prepare for the introduction of a levy. Any changes to the scope and rate of a levy would also require proportionate notice.

The Mayor will have the power to determine the size of the levy. But Mayors will need to show a balance between:

• The local economic priorities, including on tourism, that a levy is intended to support, and whether a levy rate will generate sufficient revenue to support these priorities;
• The impact on tourism demand: whether a levy is affordable, to minimise deterrence of tourism and harm to the visitor economy;
• Stability and certainty for businesses and visitors.

Accommodation providers will be liable for the levy. Providers will be able to choose whether to pass on levy costs to visitors as part of the cost of accommodation. Where the cost of a levy is passed on to visitors through higher prices, any VAT payable will be due on the total cost to the visitor.

The consultation includes the question of a cap on the levy, to ensure that visitors do not face spiralling costs and that family holidays remain affordable. One option is to cap the number of consecutive nights that the levy is applied to. For example at 7, 14, 21 or 28 nights.

Mayors may have powers to vary the chargeable rate on different types of accommodation, recognising that some types of accommodation have a disproportionate impact on local communities, e.g. short-term lets in central London. This is a specific question in the consultation, alongside a wish to be transparent and avoid confusion for visitors.

London Councils estimate that such a charge could raise between £100 million and £500 million annually in the capital.

The Mayor may well allocate a proportion of the overnight levy collected to local authorities, in our case to Westminster City Council. The Council has indicated support for such a levy and how it would invest in services to keep the streets clean and safe for visitors and residents alike.

The government consultation indicates that a portion of the levy collected should be passed to local authorities to deliver specific activities that support growth at a local level. These could include public realm improvements, street cleaning, park maintenance, high street regeneration, and the provision of public facilities like public toilets.

Views are being sought on whether there should be a minimum revenue share for Councils. Setting a percentage of levy revenues to share with local authorities would ensure the impacts overnight visits have on local services is recognised, but would limit local leaders ability to tailor shares to local priorities, and may lead to inefficient use of funding, for example where a minimum proportion exceeds the necessary relevant spend at local authority level. This allocation could instead be based on the number of visitors in each local authority, or be agreed locally as part of the introduction of a levy.

The levy is intended to support new and existing infrastructure, enhance the overall appeal of areas for residents, businesses, and visitors. The objective is to drive economic growth, including through supporting the local visitor economy.

The consultation states that the levy in intended to ensure tourism actively contributes to the long-term wellbeing of places and communities. It recognises that tourism and overnight stays interact closely with a wide range of local services and infrastructure – many of which are delivered by lower tiers of local government – and seeks to ensure that these systems are strengthened, not strained, by visitor activity. This could include, for example, improved public transport, regeneration of the public realm.

The consultation indicates that revenue costs could be met, including the delivery of local council services that support growth and the local visitor economy. Examples of this include new cultural or sporting events and exhibitions that attract visitors, transport services and supporting businesses in training and skills development that help address skills shortages in the hospitality sector.

The Mayor would be required to maintain clear accounting records for levy income and expenditure, publishing an annual report detailing:

• Total revenue raised
• How levy revenues have been used

The Mayor will receive a proportion of levy income to cover administrative costs, including: programme costs, staffing, systems, and compliance activity, and to support the administration of the levy locally. The government’s intention is that no more income from levies is retained by the relevant tax authority beyond a sum which is necessary to fund the effective and efficient administration of the local levy.

The Mayor may well include this in consultation. The Scottish cities are following the percentage model.

The options the government is considering are:

• Percentage of accommodation cost
• Flat rate charge, either per person, per night; or per room, per night

The government considers the percentage option to be simpler and fairer, allowing for the impact on budget travellers and seasonal pricing. The percentage approach is increasingly used internationally and is the preferred option for England.

One of the complexities on the percentage model is all-inclusive packages, where meals and transport might also be included in the price of a stay.

Hotel and accommodation providers in Scottish cities operating (or set to operate) the overnight levies will be subject to quarterly returns of levy raised, similar to VAT return cycles. However there is as yet no system for this in England, and no clear indication of how the administrative costs to hotels and accommodation providers of processing and accounting for the levy will be met.

Visitor levies are typically collected through accommodation providers at the point of booking or check-in. The government will want to enable providers to integrate levy collection into their existing systems where possible and minimise administrative burden, whilst acknowledging that online booking platforms and booking agents play an important role, with many visitor accommodation bookings and payments made digitally.

The government is seeking views on how the levy is shown to guests if passed on. This may take the form of a separate charge shown at the point of booking or payment, as is common internationally. This approach supports transparency and helps reinforce the connection between a levy and the visitor experience. However, it should be for individual accommodation providers to decide whether they pass a levy on to guests, and how to communicate this to their customers.

The overnight levy is proposed to be based on the volume and cost of overnight stays. Self assessment is the basis. Providers are best placed to determine the value of each stay, apply the correct percentage rate, and, for example, exclude any non-accommodation elements such as meals or entertainment, if needed subject to final decisions on the rate structure. A self-assessed model allows providers to integrate levy collection into their existing booking and payment systems, making administration more straightforward and reducing the need for centralised data processing.

The tax point should be the point of arrival, not the date of paying online in advance.

The government is proposing a registration scheme (also applying to short-term lets) to support the general administration of the levy – not just identification of liable accommodation providers. It would allow providers to notify their tax details to the Mayor and submit returns through a structured process. This would likely involve the establishment of IT systems to support digital submissions, track compliance, and manage data securely.

Records will need to be kept by accommodation providers, and information submitted including:

• Type of accommodation
• Number of rooms let and rate for each room
• Duration of stay
• Levy charged
• Exemptions, and reasons for exemptions in cases they apply
• Total levy collected

An inspection and enforcement regime is proposed, to ensure compliance with the overnight levy – underpinned by a relief and appeals process.

A levy would apply to all accommodation types used by leisure or business visitors, such as hotels, guesthouses, bed and breakfasts,  hostels, campsites, self-catering properties, and short-term lets – irrespective of size, price, frequency of letting, or booking method. The following categories are included in the consultation as in scope:

• Hotels
• Bed and breakfasts
• Guesthouses
• Hostels and bunkhouses
• Campsites and caravan parks
• Self-catering properties (e.g. cottages, apartments, short-term lets)
• Serviced apartments, aparthotels, and holiday lodges
• Glamping sites such as yurts and pods
• University halls or student accommodation let commercially during holidays
• Religious retreat accommodation where commercially let
• Accommodation in a vehicle, or on board a vessel, which is permanently or predominantly situated in one place

A levy would not apply where:

• The overnight accommodation constitutes a person’s only or usual place of residence. This would include stays such as long-term student housing or care homes
• Visitors stay in private homes with family or friends, where no commercial transaction has taken place
• Accommodation in a vehicle, or on board a vessel, that is undertaking a journey involving one or more overnight stops

The application of a threshold is part of the consultation. Options include, but are not limited to, exempting accommodation that is let for fewer than a certain number of nights per year, accommodation that is offered at a very low cost, or accommodation made available by providers that only generate very limited turnover from their accommodation activity, though this may incentivise avoidance. It is the government’s view that any threshold should not be set at a level that excludes a large number of accommodation providers from the levy, but that it should take into account the balance of the revenue raised against additional administrative costs that businesses might face.

The Scottish legislation did provide for exemptions for specialist venues like charities that offer overnight accommodation. It is unclear whether this will be carried across into the English iteration. It does state that emergency accommodation, homeless shelters and registered Gypsy and Traveller sites used as primary residences would be exempt.

The English consultation does allow for locally determined exemptions. The government is also seeking views on the case for a core set of national exemptions that apply across England and the potential for Mayors to introduce additional exemptions within defined criteria.

Mayors may also get flexibility to apply the charge only in certain geographic areas.

Stays in charitable or non-profit accommodation provided for shelter, respite, or refuge, where the accommodation is not commercially operated are proposed to be exempt. The exemption would be applied to the accommodation type rather than to the visitor. Similarly, people placed in bed and breakfast accommodation by local authorities as temporary accommodation will likely be exempt.

The levy will apply to both business stays and recreational stays.