The Principles of a Local Discretionary Transient Visitor Levy or Tourist Tax

5. Administration and compliance

This chapter sets out responses to the questions covering responsibility for the collection and remittance of any levy, the frequency of remittance, information gathering and enforcement.

Compliance costs to accommodation providers

As the consultation paper notes, during the National Discussion, concerns were expressed about the potential compliance costs of a new visitor levy on overnight stays by visitors. The consultation sought views on whether an efficient model of operation would require the accommodation provider to be liable for collecting and remitting the visitor levy.

Question 13: What is your view of the proposal that accommodation providers should be ultimately responsible for the collection and remittance to the appropriate local authority, even if the tax is collected by a third party booking agent or platform?

Please explain and provide any other comments on this proposal.

Responses to Question 13 by respondent type are set out in Table 11 below.

Respondents were evenly divided on whether accommodation providers should be ultimately responsible for collection and remittance of a levy: of those who answered the question 49% agreed and 51% disagreed. Among organisational respondents, Tourism and hospitality industry representative organisations all disagreed with the proposal as did a majority of Accommodation provider (other) respondents, while most other groups agreed or were evenly divided.

Table 11

Question 13: What is your view of the proposal that accommodation providers should be ultimately responsible for the collection and remittance to the appropriate local authority, even if the tax is collected by a third party booking agent or platform?
Respondent type	Agree		Disagree		Not answered	Total
	N	%	N	%	N	N
Individuals	126	52%	118	48%	31	275
Accommodation provider (hotel)	6		7		36	49
Accommodation provider (other)	12		47		8	67
Business organisation	3		1		3	7
Community council or residents' association	3		1		1	5
Heritage or culture organisation	7		1		4	12
Local authority	16		3		3	22
Other	1		1		3	5
Other representative organisation	1		2		2	5
Other tourism or hospitality business or organisation	4		1		2	7
Port authority			1		2	3
Professional body	5		3		2	10
Public body					6	6
Tourism and hospitality industry representative organisation			7		3	10
Tourism development or promotion organisation	4		4		3	11
Trades union, political party or campaign organisation	1				4	5
Total organisations	63	44%	79	56%	82	224
All respondents	189	49%	197	51%	113	499

5.1 The need for any remittance system to be set up in consultation with the industry and for this to involve accommodation providers of all types was suggested by respondents irrespective of their view on whether providers should be ultimately responsible for collection and remittance of a levy.

It was argued that:

• This is a complex issue requiring detailed consideration and, potentially, legal advice.
• Third party booking platforms operate in different ways. Some collect payment for the provider and forward this after deducting commission and fees, while others take the booking and pass this to the provider who takes payment from the guest and remits commission to the third party.
• Providers have limited bargaining power in relation to third party providers and, since no visitor levies exist in the UK at present, there is no local example of how the introduction of a levy might work in relation to third parties. The importance of learning from experience elsewhere was suggested as was the potential for problems if platforms collect but do not pass on the levy. The need for a clear definition of legal liability was highlighted, whether the provider or the platform remits the levy, but it was also suggested that it may be preferable for the accommodation provider to collect the levy.

A desire to avoid booking platforms charging commission on a levy was also expressed by respondents. It was argued that if the levy is included in the fee on which commission is charged it will create a cost to providers.

With respect to short term rentals it was argued both that the host should be responsible, and that the platform should be responsible for remitting levy payments. It was also suggested that introduction of the levy may encourage providers to use online booking platforms such as Airbnb who would handle the tax for them.

Accommodation providers should be ultimately responsible

Respondents who agreed that accommodation providers should be ultimately responsible for collection and remittance of a levy reasoned that this approach would be:

• Simple, straightforward or transparent and the most practical or cost-effective option.
• The same approach as used in other countries or to employ the same principle as applied to collection of other taxes.
• Likely to provide the greatest level of consistency or accountability.

Other alternatives were suggested to be too complicated.

The importance of minimising the costs and administrative burden on both accommodation providers and local authorities was highlighted and it was noted that local authorities will already have some form of relationship with providers.

Other points raised included that:

• It should be an offence for a visitor to deliberately mislead a provider.
• Providers should be permitted to deduct costs of collecting the levy prior to remittance.
• An easy-to-use platform for making payments directly would be preferable to the provider handling payments.

Among respondents who favoured making accommodation providers ultimately responsible there were apparently differing expectations with respect to the degree of involvement of booking platforms in collection of a levy. Those who expected such a platform to be involved argued that:

• Collection of the levy via booking platforms would be helpful and that it will be important that any system is designed to allow third party agents to collect the levy.
• The process should be straightforward if booking software is set up correctly and that an upfront charge can be taken as part of the booking process.
• Levies collected by online platforms should be remitted by those platforms. It was noted that booking portals and online travel agents are the primary booking route for self-catering properties.

Some respondents suggested a levy should be collected by the accommodation provider on arrival or departure rather than via third parties. Reasons given for this view included that:

• This is done overseas.
• Any exemptions claimed will have to be verified at the accommodation.
• In the event of cancellation, guests may experience difficulties in claiming reimbursement of taxes already paid.
• Online platforms will add another charge for collection of the levy.

Accommodation providers should not be ultimately responsible

Some respondents who did not agree that accommodation providers should be ultimately responsible for collection and remittance of a visitor levy reiterated their objection to such a levy in principle, while others argued it to be unfair or unreasonable, placing an additional burden on all providers and on small businesses in particular.

It was argued that whoever collects the levy payment should be responsible for its remittance and that monies collected by online agents or booking platforms should be remitted by them. This was suggested to be easy for such platforms while it was argued that the possibility a provider could be required to remit the visitor levy before receiving funds from the booking platform would be unworkable and could create cashflow problems. A Professional body respondent argued that, given the availability of online booking platforms, responsibility for remittance should not lie solely with accommodation providers.

Other comments with respect to a levy collected by booking platforms included that accommodation providers should not be held responsible for:

• Mistakes by made by third parties.
• Paying tax taken by a platform that does not hand over the revenues collected or goes out of business before doing so.

It was also argued to be unreasonable to make a self-catering provider responsible for information provided by guests.

Question 14: If accommodation providers were required to remit visitor levies after the overnight stays to which they relate (even if the payment was made well in advance) how frequently should the levies collected be required to be remitted to the levying local authority?

Please provide a reason (or reasons) for your answer.

Responses to Question 14 by respondent type are set out in Table 12 below.

Among respondents who answered the question, the highest level of support (40%) was for remittance of levies to local authorities on a quarterly basis, with 30% preferring monthly remittance and 25% annual remittance. Only 5% of respondents thought remittance should be carried out on an ongoing basis.

Individual respondents were most likely to prefer monthly remittance of levies (36% in favour) while organisational respondents showed a preference for remittance on a quarterly basis (49% in favour). There were notable differences between organisational respondent groups including between accommodation providers: while a large majority of the Accommodation provider (hotel) group preferred quarterly remittance of levies, those in the Accommodation provider (other) group were more likely to favour remittance on an annual basis. Local authority respondents preferred monthly remittance.

Table 12

Question 14: If accommodation providers were required to remit visitor levies after the overnight stays to which they relate (even if the payment was made well in advance) how frequently should the levies collected be required to be remitted to the levying local authority?
Respondent type	Annually		Quarterly		Monthly		Ongoing basis (e.g. each night)		Not answered	Total
	N	%	N	%	N	%	N	%	N	N
Individuals	51	24%	71	33%	77	36%	16	8%	60	275
Accommodation provider (hotel)			42		5				2	49
Accommodation provider (other)	32		17		8		1		9	67
Business organisation			2		2				3	7
Community council or residents' association	1		1		2				1	5
Heritage or culture organisation	1		2		2		2		5	12
Local authority	2		3		9				8	22
Other			1				1		3	5
Other representative organisation	2								3	5
Other tourism or hospitality business or organisation	3		2		2					7
Port authority					1				2	3
Professional body			5		2				3	10
Public body									6	6
Tourism and hospitality industry representative organisation	3		4						3	10
Tourism development or promotion organisation	2		3		3				3	11
Trades union, political party or campaign organisation					1				4	5
Total organisations	46	27%	82	49%	37	22%	4	2%	55	224
All respondents	97	25%	153	40%	114	30%	20	5%	115	499

In their further comments, some respondents indicated a view that there could or should be flexibility depending on:

• The basis of the charge and whether it will be subject to VAT.
• The nature of the accommodation provider, the size of the business or its seasonality. Suggestions included that quarterly or annual remittance might be appropriate for small providers while for larger businesses monthly remittance might be preferable.

The collection mechanism was also suggested to be relevant in deciding the frequency at which levies should be remitted. A Local authority respondent argued that while monthly collection would be desirable if payments are made by direct debit, quarterly or annual collection might be preferred if they were required to invoice businesses.

The absence of options for weekly and 6-monthly remittance were noted and it was argued that the latter interval would have the advantage of representing a season for many B&B businesses.

A need for consideration of issues relating to reimbursement in the event of cancellation was also raised and it was argued such problems could be avoided if payment is only taken after the stay. Further consultation with business to develop a system that is workable, and limits additional administrative burdens was proposed.

Issues were also raised with respect to General Data Protection Regulation (GDPR) compliance in handling of customer data.

Annual remittance

Among respondents who indicated a preference for annual remittance some made clear they did not wish to see a levy at all. Others commented that it would be the easiest option with fewest returns equating to the lowest administrative burden, especially for small businesses. It would also coincide with annual accounts and tax returns.

It was also argued that some providers will not have received payments from online booking agents in order to make earlier remittances and that annual remittance of a levy would reduce the administrative burden for local authorities.

Quarterly remittance

Respondents who favoured quarterly remittance argued this to be easiest or to represent less of a burden especially for small businesses.

It was also suggested to be reasonable or to represent a sensible balance and to allow councils to get reasonably quick access to funds. Further, quarterly remittance would coincide with VAT returns for many businesses. It was noted that VAT must be paid one month after the end of the quarter in question.

It was also argued that:

• More frequent remittance would be burdensome.
• Annual payments would be too infrequent and could leave an unmanageable liability if monies had been spent elsewhere in the business.

Monthly remittance

Some respondents who selected monthly remittance argued that to do so on a daily basis would not be practical including because providers may not have the capacity to submit online. Monthly remittance was argued to be easier, not to over-burden providers, and to coincide with other monthly accounting processes or with payments of Council Tax, NDR and VAT. Other benefits cited for monthly remittances included:

• Not allowing either the volume of administrative work or the size of the payments required to become unmanageable.
• Minimising the risk of large sums being lost if a business collapsed.
• Representing a reasonable balance and providing regular income for local authorities to put to immediate use. In contrast, more frequent remittance was suggested to place an additional burden on the body collecting payments, including because these will be variable amounts.

Monthly remittance was also suggested to be helpful to local authorities in terms of enforcement, monitoring and forecasting including because it would allow monitoring of actual income against expected revenue on a timelier basis than other options. Production of quantitative data on a monthly basis was also suggested to be important if it is to be of value.

Ongoing basis

Some respondents who favoured remittance on an ongoing basis suggested this should be done automatically as far as possible or referenced collection by online platforms. It was argued to be a better option for larger establishments and to avoid allowing a backlog to develop.

The consultation paper notes that it will be necessary for accommodation providers to collect information from visitors to apply the visitor levy correctly and retain records to demonstrate compliance and that this information may vary depending on the basis of the charge. It will be essential that local authorities and accommodation providers comply with GDPR in handling personal data.

Question 15: What information should an accommodation provider be required to collect and retain to ensure compliance if the basis of the charge is on a:

a) flat rate per person per night?

b) flat rate per room per night?

c) percentage of total accommodation charge?

d) flat rate per night dependent on the quality of accommodation?

Please explain why you think that information is needed for the four different scenarios.

General comments included that any information to be collected should be in line with existing information gathering requirements, such as those used for the production of annual accounts and VAT or other tax returns. There were also references to mirroring the structures or content of existing systems used, including accounting packages, booking systems and property management systems.

There were calls for information requirements to be set at a national level and for there to be standard definitions and practice across Scotland. In developing any approach, it was noted that the GDPR will need to be taken into account.

Other comments about the gathering and holding of information included that requirements should not place unnecessarily onerous burdens on accommodation providers, nor intrude unnecessarily on the privacy of visitors.

Information common to all approaches

Some of the suggestions made were made across the four options set out, including:

Guest-related information

• Information on the reasons or basis for any exemptions, as covered at Question 12 above, being applicable. There were occasional references to collecting or retaining proof(s) that exemptions were applicable.
• Biographical details for guests, including country of residence or age.
• Contact details for guests, including address and email address.
• Identity type information, such as passport information or ID card details.

Stay-related information

• Occupancy rate per night or number of people staying per night.
• Total cost of the stay per person.
• Amount of any levy collected per person per stay.

Accommodation-related information

• Information about the accommodation available, including its type, standard room or rack rates and total number of bedrooms or beds available.

The remaining analysis presented below sets out the suggestions made that were specific to individual options.

Percentage of total accommodation charge

With respect to a charge based on a percentage of the total accommodation cost it was suggested that required information would be:

• Total revenue for the property per night and, if different, the total amount to which a visitor levy would apply.
• Total revenue for the property over another set period, for example per week or part thereof.

Flat rate per night dependent on the quality of accommodation

If a charge were to be based on a flat rate dependent on the quality of accommodation, it was suggested that providers would need to retain evidence of rating or rating information, such as accreditation from VisitScotland.

Local authority administration and enforcement

The consultation paper noted that if accommodation providers are responsible for collecting and remitting a visitor levy, the local authority must be able to receive such payments. This would require knowing which businesses, premises or individuals should be remitting receipts and having powers to enforce the legislation. It is therefore likely that local authorities choosing to apply a visitor levy will need to create, operate and maintain a record of accommodation providers within their area.

Question 16: How can a local authority choosing to apply a visitor levy ensure it has a comprehensive list of all those providing overnight accommodation on a commercial basis in their local authority area?

Please provide a reason (or reasons) for your answer.

Most frequently, respondents commented on the need for a registration scheme, or specifically that any local authority wishing to charge a visitor levy would need to set up a registration scheme or introduce a licensing regime.

An alternative perspective was that there should be a national register developed and held by a national tourism authority or agency or established and controlled by the Scottish Government. Those favouring this approach thought it would reduce the risks of inconsistency and duplication of effort and be less costly and potentially confusing.

In terms of a registration system, a connection was made with the Scottish Government's ongoing work relating to short term lets, including the possible introduction of a registration system. It was suggested that a system for registering short term lets should be brought in line with any implementation plan for a visitor levy.

On a similar theme, the importance of any registration being comprehensive and including all relevant accommodation was highlighted. It was seen as important to ensure all relevant businesses are included. Sometimes connected with the need for any register to be comprehensive was the suggestion that registration should be compulsory or a legal requirement.

Relating to how a register would be populated, one suggestion was that a local authority would need to carry out or commission a comprehensive accommodation audit. Other comments identified existing information or data sources that could be used, although it was noted that data protection restrictions would need to be considered. The possible information sources identified by respondents included:

• NDR records, or Council Tax records valuation lists or processes.
• The Assessment Roll. Avoiding duplication of effort by co-ordinating with data collection work being undertaken by the SAA was proposed.
• Other records held by local authorities, such as planning and licensing records, advanced notification (e.g. for events or festivals), Environmental Health records, or information held to inform tourism development.
• The bed stock analysis provided through local Scarborough Tourism Economic Activity Monitor (STEAM) reports.
• Business registrations (either with the local authority or on other platforms). Specifically, information from Companies House.
• HMRC records, for example, regarding who has reported income from providing accommodation. Specifically, VAT registrations.
• Information gathered through monitoring or searches of online booking sites, such as Airbnb, Booking.com, TripAdvisor, VisitScotland, and of all accommodation offered online.
• Through the use of 'data scraping' tools, such as AirDNA or Transparent.

Other comments focused on the need for any registration process to be simple or easy for providers to complete, and to be free to the organisations and businesses that would need to register. The importance of businesses being made aware that they fall under the scope of any levy was noted, with the suggestion that a substantial awareness raising campaign will be required, especially if the approach relies on self-declaration. In terms of awareness-raising, it was recommended that thought be given not just to general publicity but also as to whether it can be targeted at organisations through processes that accommodation providers are likely to use. For example, information about the levy could be provided with Council Tax and NDR notices, or through third-party platforms.

Question 17: What enforcement powers should a local authority have to ensure compliance and prevent avoidance and evasion by accommodation providers?

Please provide a reason (or reasons) for your answer.

In terms of the enforcement powers a local authority should have to ensure compliance and prevent avoidance and evasion, respondents most-frequently suggested some form of civil penalty, often referring to a fine or penalty charge. Further comments including the basis on which levels of fines should be set, and appropriate levels of fines are covered at Question 18.

Other comments suggested that non-compliance could or should result in a provider no longer being able to let their accommodation or their premises being closed. This was sometimes framed around deregistration and the withholding or removal of any licence required. There was a call for any review of regulations for Airbnb to include the removal of a licence in the event of non-compliance, with the licences administered by local authorities.

Other comments about how any regulatory approach could work were that:

• Local authorities should have powers to inspection premises or to require access to records. This should include being able to require information about the occupancy and charges, including proof to support any exemptions being applied, and being able to carry out regular audits.
• Local authorities should have power of entry, including so they can enforce any 'cease and desist' sanction. This should include being able to carry out inspections.
• Any deregistration could be for a set period, such as for a year or for three years.

Other types of powers or sanctions proposed included:

• Reporting to HMRC.
• Removal of a licence to serve alcohol.

In addition to suggestions around types of penalties, there were also suggestions around staged approaches. These included that providers should be issued with a formal warning or notice of requirement to comply before the matter was escalated, for example to a fine or deregistration. It was also suggested that a custodial sentence could be an option to follow on from a fine or for repeated infringements.

More generally, it was suggested that any approach taken should be based on existing approaches, with the enforcement regimes cited including those for:

• Council Tax or NDRs.
• VAT or other payments due to HMRC.
• Tax compliance, avoidance or fraud.
• House in multiple occupation (HMO) regulations.
• Trading Standards regulations.

An approach similar to the proposal made in the Barclay Review^[10] of NDRs was also proposed.

Other comments about how any enforcement regime should be framed included:

• The imposition of a levy and any change of rate should be widely publicised in advance (both nationally and within the local authority area) to ensure providers are aware of their obligations under the law and accommodation users are aware of the charge.
• In turn, penalties should not be imposed unless there has been robust awareness-raising about the levy, the need to self-declare and the likelihood of penalties for non-compliance and their level.
• There would need to be a light-touch approach to the use of penalties in the first year of implementation of the levy in a particular local authority area.

Finally at this question, there was a view that, to be effective, any approach will need to be supported by sufficient resources from within local authorities and that compliance checks, and enforcement teams to carry them out, will be required.

Question 18: Should non-compliance by an accommodation provider be subject to a civil penalty (i.e. a fine) and if so, what would be the appropriate level be?

Please state level of civil penalty (fine) (in £ sterling) that you think is appropriate.

Responses to Question 18 by respondent type are set out in Table 13 below.

A majority of respondents, 58% of those answering the question, thought that non-compliance by an accommodation provider should be subject to a civil penalty (i.e. a fine). Individual respondents were more likely to think civil penalties to be appropriate than were organisational respondents (61% and 53% respectively).

Table 13

Question 18: Should non-compliance by an accommodation provider be subject to a civil penalty (i.e. a fine)?
Respondent type	Yes		No		Don't know		Not answered	Total
	N	%	N	%	N	%	N	N
Individuals	141	61%	52	22%	39	17%	43	275
Accommodation provider (hotel)	9		3				37	49
Accommodation provider (other)	14		34		10		9	67
Business organisation	4						3	7
Community council or residents' association	2		1		1		1	5
Heritage or culture organisation	7				1		4	12
Local authority	13				3		6	22
Other	1		1				3	5
Other representative organisation	2						3	5
Other tourism or hospitality business or organisation	5						2	7
Port authority					1		2	3
Professional body	7		1				2	10
Public body							6	6
Tourism and hospitality industry representative organisation	4		3				3	10
Tourism development or promotion organisation	2		1		4		4	11
Trades union, political party or campaign organisation	2						3	5
Total organisations	72	53%	44	32%	20	15%	88	224
All respondents	213	58%	96	26%	59	16%	131	499

There were two main principles upon which respondents thought any civil penalty regime should be founded; that the approach should be proportionate, and that the level of fines should be sufficient to act as a deterrent to non-compliance.

With reference to penalties being proportionate, further comments included that:

• Both the current offence and past behaviour could be taken into account.
• Providers should only be subject to a penalty when there are clear breaches of legislation rather than based on technicalities.

In addition to being proportionate, a number of respondents commented that fines must be at a sufficient level to act as a genuine deterrent against non-compliance. For example, a Professional body respondent suggested that any penalty should be designed to encourage compliance and not be applied with the intention of raising revenues.

Other respondents also commented that any civil penalty approach should not be used as a revenue-raising tool. Other general points made included that the approach should be:

• Cost-efficient.
• Standardised and applied consistently.

Scaled according to the evaded levy

Another suggested approach was that fines should be calculated based on a percentage or multiplier of the evaded levy. Specific suggestions made included multipliers of two to 100 times the evaded amount. It was also suggested that the rate of charge could be increased over time if any fine remains unpaid.

Other proposals were that:

• The fine should be based on the maximum that could have been due. For example, one year of the maximum levy that could have applied, so that a 10-room hotel would be charged for 10 occupied rooms per night for the year at the rate charged.
• The penalty should be equal to or greater than the revenue likely to be raised from a similar size and type of accommodation over the period of unpaid tax.
• The penalty should be for the amount not collected or paid with an additional amount to cover administration costs. A 20% additional charge was one suggestion.

Size or income of the business or provider

In terms of the basis on which size might be determined, it was suggested that levels of fines could depend on:

• Rateable values.
• Turnover, revenue, income, or profit.
• Income related to the specific property to which a levy had not been collected or remitted.

Examples given of how size might be applied to varying levels of fine included:

• £1,000 for larger organisations, £500 for medium sized organisations and £300 for smaller organisations.
• £100,000 for larger organisations, £10,000 for medium sized organisations and £1,000 for smaller organisations.
• For larger organisations, £5,000 per month of non-compliance, down to £2,000 per month for smaller organisations.

Flat rate based on instances non collection or payment.

This proposed approach was based on a flat rate charge per number of guests or number of nights for which a levy was not charged or passed on. Specific suggestions included:

• £10 or £100 for each undeclared guest or guest for whom the levy was not collected.
• £10, £20, £500 or £1,000 per person per night of uncollected levy.

Levels of fines

A number of respondents gave an amount at which they thought any fine should be set, sometimes expressing the amount as a minimum, maximum or maximum annual charge. Suggestions ranged from £50 to £100,000.

Respondents sometimes proposed that the amount of fines should increase for any repeated or subsequent instances of non-compliance, for example, £100 for a first offence rising to £500 for repeat offenders or offences, or £1,000 for a first offence rising to £5,000 for repeat offenders or offences.