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The government is to introduce a holiday tax bill, which UKHospitality and HOSPA warn could increase the cost of a two-week family holiday by £100 during the current cost-of-living crisis.
The inclusion of the bill in the King’s Speech yesterday (13 May) marks a policy reversal, after ministers previously told the House of Commons that the government would not introduce such a levy.
Recent public polling by UKH and Oxford Economics has indicated 56% of people oppose the tax, with only 24% showing support for it. Data also suggested voters are 10 times more likely to reject an MP who backs the bill.
In light of this, the trade body has contacted MPs to highlight the potential impact on their constituencies, as the same research suggested the holiday tax represents a £1.6bn tax increase.
In addition, the study claims the levy could cost 33,000 jobs and reduce GDP by £2.2bn. It further estimates a £688m loss to the Treasury and a £1.8bn reduction in tourism spending.
The proposed tax would be added to the existing 20% VAT rate, making the UK an outlier compared to European rivals that maintain lower VAT levels for tourism.
Industry professionals have raised concerns regarding the practical implementation of the bill, while operators have highlighted potential issues with reservation systems and the complexity of splitting tax elements from packaged rates.
Allen Simpson, chief executive of UKH, said: “The government has confirmed it will legislate to make family holidays more expensive during a cost-of-living crisis. It’s a shocking U-turn after it told both the House of Commons and UKHospitality that it would not implement a holiday tax.
“The facts are simple. A holiday tax will increase the cost of a staycation for Brits, it will hit lower income families hardest, it will lose the Treasury money and it will cost 33,000 jobs. It is nonsensical for the government to go ahead with such an unpopular measure. There is still time for the government to think again and stop the holiday tax.”
Jane Pendlebury, chief executive of HOSPA, added: “The proposed Overnight Visitor Levy Bill raises practical questions that go beyond whether hotels support or oppose a tourist tax. Compared to Europe, the UK is already an expensive option for hotel guests.
“Hotels will need to understand how any levy is displayed to guests, how it is collected, how it is treated across online travel agents and direct booking channels and what it means for VAT, commission, reporting and exemptions. A levy may sound simple at policy level, but it has real implications for revenue management, finance systems and guest communication.”
