Relief at Government U-turn on 'bed tax'

HOTELIERS and guest house owners have breathed a sigh of relief after the Government backed down on a proposed “bed tax”. A levy on hotel guests for each night of their stay was among the options considered by Sir Michael Lyons as part of a three-year study into ways of funding local government.

HOTELIERS and guest house owners have breathed a sigh of relief after the Government backed down on a proposed “bed tax”.

A levy on hotel guests for each night of their stay was among the options considered by Sir Michael Lyons as part of a three-year study into ways of funding local government.

In his report last month, Sir Michael said the evidence did not support the imposition of a bed tax on a national basis but recommended the Government to launch a consultation on giving individual authorities the power to introduce a bed tax locally if they chose.

However, Local Government Minister Phil Woolas said the Government did not intend to introduce a tourism tax - a move welcomed by accountants and business advisers PKF East Anglia whose hotels consultancy service had warned that many hotels could be forced out of business if the plans for a bed tax went ahead.


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The tax of up to 5% of the cost of the room would have been payable by guests on top of VAT and, with hotels also funding local government through business rates and central government through Corporation Tax, most would have had no choice but to pass on the cost to customers - to the likely detriment of bookings.

PKF East Anglia partner and hospitality sector expert Michael Muskett described the Government's rejection of a bed tax as “great news”.

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He said: “The introduction of a bed tax could have had disastrous consequences, certainly among owners of smaller, independently owned hotels and guest houses, seriously diminishing their ability to operate at a profit and thereby making their businesses unsustainable.”

The British Hospitality Association (BHA), which represents the UK's hospitality industry and had been lobbying exhaustively to ensure the controversial tax did not become law, also welcomed the move.

Noel Byrne, operations director of the Barnham Broom hotel in Norfolk and Bedford Lodge in Suffolk, and chairman of the BHA eastern region, as well as chairman of the Tourism Business Action Group in Suffolk, said the tax would not only have harmed the UK's tourism industry but have directly contravened one of the Government's own tourism policies.

“We are so relieved,” he said. “It would have cost my business alone a potential loss of over £100,000 per year and by forcing us to increase room rates the Government would only have created a stronger argument for people to holiday abroad.”

The BHA, using research by Nottingham University, established that a 5% bed tax would cut UK inbound tourism revenues by £220 million and domestic by £325 million.

In the eastern region, the loss would have translated to a loss of up to £26 million in domestic revenue and £11 million from overseas.

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