City councillors are set to vote on Scotland’s first ‘tourist tax’ tomorrow, which sets out a 5% charge on accommodation costs capped at five nights, to raise an estimated £50m a year for local services and infrastructure.
The scheme is not due officially start until July 24, 2026. However, if approved in its current form businesses will be able to apply this to bookings on and after this date from the start of May this year. All will have to update their rates to include the levy to comply with UK consumer law requiring the final price paid to be advertised.
It will be the responsibility of accommodation providers to collect the money and they will be left to decide either to include the surcharge when rooms are booked or have guests pay it when they check in “according to their own business practises”.
In a letter to Edinburgh Council and the Scottish Government, the Scottish Tourism Alliance (STA), whose members include the Association of Scotland’s Self-Caterers, Hostelling Scotland and the Scottish Bed & Breakfast Association, raised “urgent concerns” about the visitor levy and said the proposed approach “risks undermining both its intent and effectiveness”.
Plans for businesses to implement the scheme in 15 weeks, it said, were “operationally impossible” and industry feedback “point to insurmountable challenges”.
The letter, sent today, January 16, states: “Major online booking platforms have confirmed that they will not have the necessary systems in place to manage, collect, and remit the levy within this timeframe. These platforms are integral to the successful operation of the levy, as they facilitate the majority of bookings across the tourism sector.
“Local authorities and businesses require significant lead time to develop and implement procedures, train staff, and integrate technological solutions. The current timeline precludes the possibility of adequate preparation, risking widespread noncompliance and operational chaos.”
The Alliance said “several unanswered questions” remained over “some of the complexities around the role of third parties in collecting the Visitor Levy, including destination management companies, tour operators and online booking platforms”.
It also warned of “significant legal concerns that may result in judicial review”.
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These include commercial sensitivities around the need for price transparency and absence of representation for small accommodation providers on the Visitor Levy Forum, which the council will consult with on how the scheme is run and funds are spent. The letter added plans to top-slice revenues for affordable housing projects and participatory budgeting could also be subject to a court challenge, claiming this approach “undermines the legislative intent that funds be directly used to enhance the visitor economy”.
Guidance from VisitScotland says net proceeds from the levy can be spent on projects which ‘directly or indirectly’ benefit people visiting the area for the purposes of leisure or business.
STA urged the Scottish Government to ensure Edinburgh Council revise its 18-month lead in period and extend the date accommodation providers can apply the charge “well beyond May 2025”.
The organisation also wants to see a review of the “administrative and financial burden of the percentage-based charging model” and consider a “simpler, capped flat fee”.
The Federation of Small Businesses (FSB) has similarly warned there “simply isn’t enough time to meet the deadlines laid out by the city council without risking significant disruption to the businesses who will have to apply the charge and their customers”.
Garry Clark, FSB’s development manager for Edinburgh and the East of Scotland, said business sentiment towards the levy “has shifted,” adding: “Many small businesses have warmed towards the idea, recognising the vital investment it can bring to improve infrastructure and services for the good of visitors, residents and local businesses alike.
“However, there are still unanswered questions about the way in which the levy is being introduced in Edinburgh, including whether its plans for investment in housing and participatory budgets are legally robust.”
Edinburgh Tourism Action Group (ETAG), the umbrella organisation for the tourism sector in the Capital, struck a different tone, urging councillors to “embrace this as a chance to be ambitious and visionary”, but said it shared concerns the surcharge being applicable from May “does not provide sufficient time to adapt to the levy and meet pricing legislation”.
It said: extending the transition period “would give businesses adequate time to prepare, leading to higher compliance, fewer disputes, and a smoother implementation of the visitor levy.”
The council said: “While there is no requirement for businesses to collect the levy at the point of booking, with accommodation providers able to choose how best to implement it according to their own business practices, visitors must be made aware of the final price of their accommodation in order to comply with UK consumer laws.
“Accommodation providers will only need to submit a return and pay the council the required levy amount from the end of September 2026 and businesses will be given reasonable time to complete this return.
“We’ve been working with partners to develop the levy collection platform, and we expect to run testing and pilot activity next winter, in plenty of time for the levy to come into force.”