Visitor Levy (Amendment) (Scotland) Bill: Business and Regulatory Impact Assessment (BRIA)

Section 3: Costs, impacts and benefits

The potential set-up and administrative costs set out below are largely based on those estimated in the Financial Memorandum and BRIA published alongside the 2024 Act.^[4],[5] These were illustrative of the scale of costs and were not intended as accurate forecasts. Individual local authorities will be responsible for assessing the specific costs and impacts associated with any model they decide to implement; these assessments will take into account local circumstances and draw on consultation with local communities and businesses.

The Bill clarifies how the levy should be calculated where accommodation is sold by way of third-party transactions and not directly to the visitor. This may require system updates for platforms and accommodation providers. Since the introduction of the 2024 Act, some local authorities have published their own estimates of administrative costs, and these are reflected below where possible.

It is important to note that, given the additional flexibility that the Bill seeks to provide local authorities there remains limitations in assessing financial implications. At this stage, the Scottish Government does not know how many local authorities will ultimately choose to introduce a visitor levy scheme or the basis on which they would do so. However, at least five local authorities (Aberdeen City, Edinburgh City, Glasgow City, West Dunbartonshire and Stirling) have already decided to introduce a percentage-based model, although these schemes have not yet commenced. A number of other local authorities have decided to either pause or reject plans to introduce a visitor levy and others have either not announced any plans or are at an early stage of consideration and engagement.

Quantified costs to businesses

The following figures represent administrative costs estimated in the Financial Memorandum and BRIA published alongside the 2024 Act and are provided for context only. They do not arise from changes introduced by the Bill and the underlying costs of setting up and administering a visitor levy remain those associated with the 2024 Act.

Accommodation providers are recognised as a distinct sector, separate from businesses in general because they are likely to incur additional costs should a visitor levy be introduced in the area(s) they operate in.

Indicative initial set up costs under the 2024 Act were estimated to be between £3,000 and £10,000 per accommodation provider for small- and medium-size businesses and between £150 and £1,100 for micro-businesses. Recurring costs under the 2024 Act were estimated between £200 and £400 per year for small- and medium-sized businesses and between £100 and £500 for micro-businesses. These figures relate to updating systems, reviewing processes and familiarisation time for staff. These figures do not arise from the specific provisions of the Bill and are provided for context only. Local authorities may choose to compensate accommodation providers within their visitor levy schemes to help offset these administrative costs.

As highlighted in the BRIA published alongside the 2024 Act, the wider tourism sector as a whole represents around 8 per cent of total employment in Scotland and is a particularly important source of employment in rural areas. The size of the visitor economy varies in significance across different regions of Scotland, with Edinburgh and the Lothians and the Highlands and Islands attracting large proportions of total overnight visitors. As highlighted in the Island Communities Impact Assessment published alongside the 2024 Act, the proportion of self-catering accommodation is higher in island and rural communities compared to the national average.^[6]

Other impacts

While the Bill does not introduce new obligations beyond those already established under the 2024 Act, there are other impacts to consider. Differences in levy design between local authorities could lead to perceived inconsistency and complexity for businesses operating across multiple local authority areas. Smaller operators may face additional administrative challenges if local schemes introduce varied exemptions. There is also a minor risk that uncertainty around levy structures could influence investment decisions in the accommodation sector, particularly for businesses planning expansion in areas where levy adoption is unclear. These impacts are expected to be limited and can be mitigated through clear guidance and best practice sharing between local authorities. VisitScotland’s statutory guidance plays a key role advising local authorities in their scheme design and compliance with the Visitor Levy (Scotland) Act.

Costs to businesses arising from the level at which the levy is set will depend on consumers’ willingness and ability to pay higher prices for their accommodation. The impact on visitor demand at a Scotland level is addressed below, however, there is also potential for displacement of visitor spending between different areas of Scotland, affecting not just accommodation providing businesses but also other businesses in industries that may benefit from visitor spending. All local visitor levy schemes must be underpinned by appropriate consultation with local communities and businesses.

Scottish firms’ international competitiveness

The BRIA published alongside the 2024 Act details the potential impacts of any visitor levy scheme on the competitiveness of Scottish accommodation providers within the UK and elsewhere in Europe. This BRIA highlighted research indicating that visitors to Scotland were primarily drawn by its natural and cultural resources.^[7]

The Scottish Government has determined that the provisions of the Bill do not materially affect the competitiveness of Scottish businesses because the enabling power to introduce a visitor levy scheme has already been introduced under the 2024 Act.

Benefits to business

The Bill does not introduce new obligations beyond those already established under the 2024 Act, but it provides local authorities with greater flexibility in how a visitor levy scheme can operate. This flexibility may benefit businesses indirectly by allowing local authorities to design levy models that better reflect local market conditions and accommodation types, reducing disproportionate impacts on certain operators. In addition, revenues raised from visitor levies, whether under a percentage-based or fixed-amount model, must be reinvested by local authorities into local infrastructure, facilities, and services that enhance the visitor experience. Improvements in public amenities and cultural attractions can increase destination attractiveness, supporting higher visitor numbers and longer stays, which in turn may generate additional demand for accommodation and related services, benefiting the wider tourism economy and local supply chains.

Small business impacts

The BRIA published alongside the 2024 Act found that smaller businesses including hotels, B&Bs, guest houses, hostels, commercial campsites and caravan sites, restaurants or pubs with rooms and self-catering accommodation including any properties let via collaborative sharing platforms may be affected disproportionately by additional compliance costs, in particular for those operating below the VAT registration threshold. These businesses are likely to have limited resources (in terms of time and financial resources) to ensure compliance with a visitor levy, particularly if there is complexity around exemptions in any local scheme. This impact was mitigated in the 2024 Act by including provisions which allow liable providers to enter into an arrangement with a third party to collect the levy, remit it to the local authority, and complete any relevant returns on their behalf, subject to agreement by the local authority. Other mitigations for accommodation providers not using platforms that collect and remit the visitor levy on their behalf may be made by the local authority, including for instance, requiring less frequent returns. All local visitor levy schemes must be underpinned by appropriate consultation with local communities and businesses.

The Scottish Government has determined that the provisions of the Bill do not affect small businesses in any materially different ways to the 2024 Act.

Investment

There are no notable impacts in relation to Scotland’s attractiveness as a place for global investment.

Workforce and Fair Work

There are no notable impacts in relation to workforce and Fair Work.

Climate change/Circular Economy

There are no notable impacts in relation to climate change and the circular economy.

Competition Assessment

The Scottish Government has determined that the provisions of the Bill do not affect competition between businesses in any materially different ways than the 2024 Act.

Under the 2024 Act, there remains the potential that some smaller accommodation providers could exit the sector if administration and compliance costs associated with the levy are perceived to be significant.

The BRIA published alongside the 2024 Act highlighted this risk and noted that impacts would depend on local scheme design and exemptions. The Amendment Bill does not introduce new obligations beyond those already established so these risks remain unchanged.

Consumer Duty

The BRIA published alongside the 2024 Act included a consumer assessment and this information has been used to inform the Consumer Duty as required under the Consumer Scotland Act 2020.

As above, the purpose of the Bill is to provide local authorities with greater flexibility around how a visitor levy scheme could operate in order to best meet local requirements and circumstances. Given the discretionary nature of the power to introduce a visitor levy under the 2024 Act, individual local authorities who choose to introduce a visitor levy – whether a percentage-based model or a fixed amount (or amounts) model – will be required to consider the impacts of their decision on consumers.

A fixed amount (or amounts) model – which would be enabled by the provisions of the Bill – has the potential to be either progressive or regressive where costs of the levy are passed on to the visitor depending on how the local authority decides to set the levy rates. A single flat rate would be regressive, but where the local authority decided to set higher rates for more expensive accommodation and lower rates for cheaper accommodation the model could be progressive.

Mitigation strategies:

Local authorities will be able to introduce differential rates for different types of accommodation to reduce regressivity; local authorities can apply exemptions for vulnerable groups (e.g., children, carers, or those traveling for medical reasons); statutory guidance from VisitScotland will support local authorities in designing fair and transparent schemes.

Consumer benefits:

Consumers may benefit from revenues raised from a visitor levy that are used to develop, support and sustain facilities and services that are used by visitors. This includes improvements to local infrastructure, cultural attractions, and public amenities, which enhance the visitor experience and can indirectly benefit residents

Fairness assessment:

Local authorities will be expected to undertake equality and socioeconomic impact assessments when designing schemes to ensure compliance with the Consumer Scotland Act 2020 and to demonstrate that consumer interests have been considered.