Whilst the management of the implementation of any Tourist Visitor levy is a devolved matter – to be considered by each the Scottish Parliament and the Welsh Senydd separately, the administration of VAT is a UK Government managed tax. As each administration therefore considers how it will implement this new levy the hospitality sector still waits for news on the practical impact it will have on them – how to charge it – is it part of their business income – is VAT due on the charge? being just some of those questions.
In the context of the Levy plans in Scotland, the Chartered Institute of Taxation (CIOT) and the Institute of Chartered Accountants Scotland (ICAS) have kindly shared an open letter to the Scottish Government following their meeting with HMRC VAT Policy in May – here.
The responsibility to account for the Scottish Visitor Levy currently sits with the accommodation provider and would appear to result in UK VAT being accounted for on what is, a local levy – the revenue from the levy resting with the devolved administrations. Concerns have also been expressed in that the addition of the levy charge to the businesses turnover would push many small hospitality providers over the VAT registration threshold as an unintended consequence – adding to the costs of their business administration.
The Welsh Government have now agreed the legislation for the implementation of a Tourist Visitor Levy in Wales – a link to the bill can be found here.
From the VAT perspective the expectation is that the levy will be charged by the accommodation provider and if that business is VAT registered then VAT will be added to the levy value. To that extent the levy will be seen as taxable business income which would count towards the VAT turnover threshold for an unregistered business – the current VAT threshold being £90,000 of taxable income.
In essence there will be a tax (VAT) on a further “indirect tax” (the visitor levy) a key difference being that for the visitor levy the tax revenue will be retained by the local authority body where the accommodation is based whilst the VAT revenue stream flows to the UK Treasury.
