Scottish Building Safety Levy: consultation analysis report

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Overview

The Grenfell Tower fire tragedy in London in June 2017 highlighted concerns about the safety of medium and high-rise buildings with external wall cladding across the UK and demonstrated the need to take action to remediate buildings with unsafe cladding. On the day following the fire the then Prime Minister, Theresa May, announced that there would be a formal Inquiry into the tragedy.

The Inquiry, chaired by Sir Martin Moore-Bick, opened on 14 September 2017 and concluded with the publication of the Phase 2 Report on 4 September 2024. The Scottish Government response to the report was published on 25 March 2025.

The Housing (Cladding Remediation) (Scotland) Act 2024 was introduced by the Scottish Government to facilitate the delivery of the Cladding Remediation Programme (CRP), which aims to identify, assess, and address the safety risks of buildings within scope of the Programme.

To meet the costs associated with funding cladding remediation in England, the UK Government legislated through the Building Safety Act 2022 for the introduction through secondary legislation of a Building Safety Levy on the development of new residential buildings. The UK Levy will only apply to developments in England, meaning that the Scottish Government will receive no consequential funding as a result of its introduction. This creates a gap in the funding options available to address cladding remediation in Scotland.

The Scottish Government set out in its Programme for Government 2024-25 a commitment to introduce a Scottish Building Safety Levy (SBSL) to support the funding for Scotland’s CRP, following the devolution of the necessary powers. These powers were devolved on 19 December 2024.

The SBSL will be charged on the construction of new residential buildings in Scotland, with an estimated revenue target of £30 million per annum. The Building Safety Levy (Scotland) Bill was introduced to Parliament on 5 June 2025, and the Levy is intended to come into effect on 1 April 2027.

Consultation and engagement

In September 2024, the Scottish Government published a consultation seeking views on the SBSL and how it should operate. This consultation ran until November 2024 and was accompanied by a programme of stakeholder engagement.

Engagement also continued with the Scottish Building Safety Levy Expert Advisory Group. This group was established in May 2024 to inform policy development and provide expert advice, challenge and scrutiny of policy positions in relation to the SBSL.

This report provides an analysis of the responses submitted to the public consultation, and summarises, where relevant, views raised during accompanying stakeholder engagement sessions and meetings of the Expert Advisory Group.

The publication of this analysis report accompanies the introduction of the Building Safety Levy (Scotland) Bill to the Scottish Parliament.

Summary of views

From the consultation responses and engagement sessions, the Scottish Government received views from a range of individuals and organisations, including: representatives from the residential property development industry and related sectors; local government; and tax, accountancy, and legal organisations.

Some of the key views which emerged were:

•The view that property developers are already contributing to the cost of cladding remediation, and that the SBSL would constitute a disproportionate burden relative to level of responsibility for the problem.

•Emphasis on the importance of considering the impact of the SBSL within a wider context of cumulative impacts and regulations on the housebuilding industry.

•Strong support to exempt affordable housing from the SBSL.

•Strong support to exempt smaller developers from the SBSL.

•The view that there should be consideration of differing regional impacts of the SBSL, particularly on island and rural communities.

•Emphasis on the importance of certainty and clarity for property developers in understanding their liability for the tax and factoring these costs into their financial planning for development projects.

Next steps

The views gathered through the consultation and engagement have informed the Building Safety Levy (Scotland) Bill which has now been introduced.

The Bill will be considered by the Scottish Parliament in line with its established process for examining draft legislation, more details of which can be found on the Scottish Parliament website.

If the Bill secures Parliamentary approval, secondary legislation and preparatory work by Revenue Scotland will also be required before the SBSL can be formally introduced. This is in keeping with the approach taken with the other fully devolved taxes: Scottish Landfill Tax, Land and Buildings Transaction Tax, and Scottish Aggregates Tax.

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Consultation

The Scottish Government published a consultation on the SBSL on 23 September 2024 which was open for responses for a period of eight weeks, closing on 18 November 2024.

The consultation invited responses to a range of open and closed questions on several aspects relating to the SBSL, including the strategic context for the tax, scope, calculation, operational considerations, and impacts. For all closed questions, respondents had an opportunity to offer comments to support their views.

The consultation received a total of 78 responses, nine from individuals and 69 from organisations. A full list of organisational respondents is set out in Annex A. Where responses have been submitted by organisations which are part of a larger organisational group, this has been noted in the annex. Some responses were received from different parts or different members of the same organisation. Where these responses are substantially different, they have been treated as separate responses; where these responses are broadly similar or identical, they have been treated as one response for the purposes of analysis, and this has been noted in the annex. This left a total of 76 responses from the original 78 received, and it is this total (76) which is reflected in the analysis presented in this report. Throughout this analysis, percentages are rounded to the nearest whole number and may not always total to 100% when presented in tables.

Where permission has been given, responses have been published in full on the Scottish Government’s consultation webpage and can be found here.

For the purposes of analysis, the responses have been categorised by respondent type as follows:

Responses were received both through the Citizen Space platform and via email submission. Of the responses received by email, a number of these did not respond to the questions directly but rather provided their comments in a statement-style format. This included 27 non-standard responses from members of representative body Homes for Scotland. All statement-style responses were analysed individually under the most directly relevant consultation question.

The consultation responses were analysed by Scottish Government officials, with comments allocated to certain themes under each question. The analysis is presented in Part 3 of this report as a question-by-question analysis, separated into three sections (Principles, Operational Considerations, and Impacts) according to the structure of the consultation document. The analysis presents the key themes raised by responses to each question and provides illustrative quotes from respondents where useful. Where comments were raised only by a singular respondent and did not relate to any other theme found, and where comments did not relate to the specific question or to the SBSL, these have not been set out in detail.

Other engagement and Expert Advisory Group

Where relevant, the analysis is supplemented by a summary of views from stakeholder engagement sessions and from meetings of the Scottish Building Safety Levy Expert Advisory Group.

The consultation was accompanied by a programme of engagement with stakeholders to facilitate further collaboration with the residential property sector. This included a Ministerial Roundtable and three official-led sessions considering the scope and calculation of the tax and potential impacts on Small and Medium Enterprises (SMEs). A summary of attendance at these sessions is set out in Annex B.

To help inform policy development for the SBSL, the Scottish Government convened an Expert Advisory Group comprised of representatives from the residential property development sector, as well as representatives from relevant professional bodies in connection with tax and local government building standards. The Group’s remit is to provide expert advice, challenge and scrutiny of policy positions on the design of the SBSL. The Group has so far met on five occasions, and summaries of discussions at these meetings are available here.

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Part A of the consultation document focused on the principles of the tax. These sections introduced and set out the following:

•The strategic context for the SBSL

•Considerations of scope

•Considerations of calculation

The principle of the SBSL

Question 1: Do you think a new tax on housebuilding, paid by developers, is a fair way to generate revenue to fund the Scottish Government’s Cladding Remediation Programme? Please give reasons for your answer

Of those who answered this question quantitatively (39 respondents), the breakdown of views was as follows:

The majority of those who responded ‘no’ to this question were property developers and organisations representing property developers, with others opposed including some island and rural local authorities. Those who responded ‘yes’ were primarily non-developer organisations. A full breakdown by respondent type is provided in the table below.

Impacts

Housebuilding

A significant number of responses raised a concern that the SBSL could have a negative impact on the housebuilding industry by raising the cost of building homes and threatening the viability of developments. Developers and other housing/property stakeholders in particular emphasised this theme, raising that housebuilders may not be able to absorb the cost of this additional tax and therefore fewer homes will be built, and/or businesses will no longer be viable. This point was frequently highlighted in the context of Scotland’s housing emergency and the urgent need for new homes, including in rural and remote areas.

“We cannot support or sanction a levy which further increases the cost of building homes for the people of Scotland at the time of a housing emergency which will threaten the viability of our business.” - Campion Homes

Some respondents raised this negative impact on housebuilding for Scotland in particular, noting that increased costs may deter investment in Scotland for those businesses which may choose to invest in homes elsewhere.

“Members have made clear through engagement sessions with officials that further regulatory costs will affect investment in homes being built in Scotland. In particular, UK-wide home builders have a choice where investment is made. Every penny not spent on investment in home building in Scotland results in more homes being built elsewhere.” - Homes for Scotland

On this latter point, a couple of responses noted the importance of ensuring parity between Scotland and England in the design of the levies, to avoid cross-border impacts and ensure investment in Scotland is not deterred.

Some responses noted their view that any negative effects of the SBSL on housebuilding would also create negative impacts on the wider economy. Responses discussing this theme noted the jobs and wider economic benefits that are created by the housebuilding industry, and that other industries and infrastructure are reliant on the strength and contributions of the housebuilding sector.

“...as a sector, home building in Scotland supports 79,200 jobs as well as improved health and education outcomes. It also generates over £3bn in annual GVA and invests £332m in affordable housing contributions and a further £179m supporting infrastructure such as schools, healthcare, public open space, transport and sport, leisure and community facilities per annum.” - Homes for Scotland

A significant number of responses (predominantly from developers and organisations representing developers) emphasised that the SBSL would be further adding to cumulative burdens on the housebuilding industry from existing or proposed Scottish Government policies and regulation, and that these burdens are exacerbating an already challenging context which Scottish home builders are operating within.

“Not only is this additional tax burden unnecessary for those developers who have already committed to remediate, but it should also be viewed within the wider context of the challenging operating landscape we face in Scotland. This includes a difficult and lengthy planning process, the advent of Scotland’s Passivhaus standards, rent controls and more.” - Miller Homes

House prices

Some responses expressed the view that the SBSL could have an impact on house prices, with developers seeking to pass on the cost of the SBSL by raising the cost for home buyers. This theme was often discussed alongside the theme of ‘responsibility’, with the view that house purchasers should not be bearing the cost of remediation for which they are not responsible.

“Ultimately the Levy / Tax is likely to be paid by the new Home Owners, who had no responsibility for creating this situation.” - Scottish Building Federation

The view that the tax could raise house prices was mostly expressed by other housing/property stakeholders or other organisations, rather than developers themselves. This perhaps reflects the complexity around determining whether developers would be able to pass on the cost of the SBSL through raising house prices. Homes for Scotland articulates this complexity in their response, noting the view from the Competition and Markets Authority that new build prices are constrained by the second-hand market, and that this view is accepted by the Scottish Government. Homes for Scotland consequently considers that the only other option for developers would be to try to absorb the cost, perhaps by offering a lower price for land, which may not be accepted by landowners and thus may impact development viability and housing supply.

Rural areas

Some respondents (mostly local authorities) raised that the SBSL would place a disproportionate burden on remote and rural areas. This was referenced in part due to existing pressures on and additional costs for housebuilding in these areas, with the proposed Levy having the potential to further disproportionately impact development viability.

“Housing market viability is fragile in our area with the cost of housebuilding often greater than the market value of the home. Any additional burden on housebuilding, such as the Scottish Building Safety Levy, could make these developments unviable.” - South of Scotland Enterprise

Further to this, it was raised that remote and rural areas would be shouldering a disproportionate burden for costs which would mostly (or solely) benefit areas elsewhere in Scotland, given that buildings with unsafe cladding which will be improved with remediation are predominantly in larger cities.

“There are very few properties in the Borders which would benefit from the levy, and this is anticipated to be the case for other rural areas. This creates a risk that rural [local authorities] with less financial means effectively subsidise remediation for more urban areas which may have a better market context and more funds.” - Scottish Borders Council

Responsibility

Many responses referenced the concept of responsibility with regards to the principle of the tax, emphasising that those responsible for the issue of unsafe cladding should be expected to cover the cost of remediation.

A few responses discussed this theme of responsibility in expressing their support for the principle of the SBSL, with the view that the housebuilding industry bears responsibility for the problem of unsafe cladding and should therefore bear the cost of remediation, in line with ‘polluter pays’ principles.

“It is right that interventions be introduced to ensure that industry meets the costs, following polluter pays principles...” - National Fire Chiefs Council

However, this theme was most often raised in the context of opposition to the SBSL. Several respondents expressed that only those developers who were responsible for installing unsafe cladding should bear the cost of remediation, and that it would be unfair for a levy to be imposed on existing developers who have never contributed to this historic problem.

“Developers who can demonstrate that they have not delivered buildings with unsafe cladding should be exempt from any BSL; it would be unfair to penalise those developers.” - Bancon Homes

Furthermore, some respondents argued that buildings now identified as requiring remediation were built in accordance with building standards of the time, therefore government should bear some responsibility.

“...it should be noted that the vast majority of buildings were constructed in accordance with the applicable Scottish Building Standards at the time. This does present an issue in terms of accountability, as reasonably Scottish Government should be contributing.” - Westpoint Homes

Additionally, it was emphasised by several respondents that there are other parties responsible for the supply and installation of unsafe cladding (for example manufacturers and non-UK based home builders), and that these parties should be pursued for the cost of remediation rather than the cost lying solely with developers. On this point, it was further noted by a few respondents that there is no legal mechanism in Scotland for home builders to pursue others to recover the costs of remediation of their own buildings.

“...there are no proposals to seek recourse from product manufacturers despite evidence indicating flaws in many products which home builders used in good faith...” - Homes for Scotland

On this point, several respondents (predominantly developers) characterised the SBSL as an additional cost for developers towards cladding remediation on top of the contributions they are already making. Responses highlighted that many developers have already been working with the Scottish Government to remediate their own buildings directly, and additionally some developers are contributing to the cost of cladding remediation through Residential Property Developer Tax (RPDT). Some respondents were therefore critical of the SBSL as a second or third cost to be covered solely by developers for the same problem.

“Members are actively contributing to two streams of resource to progress cladding remediation, through their own agreement to act, and the payment of the RPDT and have substantial concerns that a third contribution – a “triple dip” – will be unsustainable to their businesses as home builders.” - Homes for Scotland

Clarity on context for tax

Several responses, predominantly from developers, expressed the view that there is a lack of clarity around the context for the tax, and that it is therefore difficult for developers to assess potential impacts.

Much of this uncertainty was referenced in the context of the scope and size of the CRP, the details for which remain unknown, creating uncertainty around the revenue that needs to be raised to support the programme and how this revenue ties in with existing funding streams. It was expressed that further detail was needed on the number of buildings requiring remediation to support the evidence base and rationale for the SBSL, and to help developers understand the funding gap the tax aims to fill and what the impact of the tax may be.

“Scottish Government have no idea of how much money is required. Without understanding the quantum of the tax it is very difficult to comment accurately on the impact to the delivery of housing in Scotland.” - Westpoint Homes

In their response, Homes for Scotland acknowledge the Scottish Government’s revenue target of £30 million per annum, in proportion to the UK Government’s revenue target for the England-only levy. However, they express the view that the UK Government estimates do not yet have a sufficient evidence base, and additionally the scale of Scotland’s CRP and buildings requiring remediation may differ to that of England.

Respondents noted a further lack of clarity on the scope of the tax, and their inability to assess what the cost for developers may be without certainty on the number of homes and developers which would be liable for the SBSL.

Revenue raising approach

Some responses expressed the view that the proposed SBSL would be the most suitable and practical approach to raise revenue required for cladding remediation, and that there is a lack of alternative options, with a couple of respondents noting the need to match the Building Safety Levy which will be introduced in England only. A few responses noted that this tax would spread more manageable costs across the industry and prevent the cost falling on residents of buildings requiring remediation, or on taxpayers. The latter point – that the cost should not fall on taxpayers or residents – was also acknowledged by some respondents who opposed the principle of the SBSL.

Relating to the theme of responsibility, one respondent noted that pursuing only those considered responsible for the problem of unsafe cladding could lead to unknown costs and could take up extensive time and resources, therefore the SBSL could be a better approach to spread the cost across the industry.

Some of these responses which discussed the SBSL as the most suitable approach to fund cladding remediation noted the importance of the SBSL being applied in a way that is proportionate and mitigates potential unintended consequences on the housebuilding industry and housing market.

Commencement and completion of remediation

Several responses raised a concern over a perceived lack of urgency thus far from the Scottish Government to address the problem of unsafe cladding.

“Whilst we welcome the progress that has been made in more recent months, we believe the lack of urgency from the Scottish Government to address both resident and sector concerns has led to unacceptable delays in making progress in this crucial area.” - Homes for Scotland

Relatedly, a few responses noted that the Scottish Government has already received money to fund cladding remediation which has not yet been spent.

Safe construction

A few responses noted the importance of high standards for safety in construction, expressing the view that the proposed Levy should not be introduced in isolation but should be part of a wider holistic approach to support better building safety standards and regulations.

Other

Other comments raised by singular responses included the view that the SBSL should be used to fund wider building safety issues.

Engagement sessions on the principle of the SBSL

Some of the points raised in the engagement sessions which accompanied the consultation align with some of the themes discussed above, including the view that the SBSL would be a further tax burden on developers who are already paying towards the cost of remediation, that the SBSL would disproportionately target developers for this cost despite others in the supply chain holding responsibility, and that the house building industry is already facing wider cumulative burdens. Other points raised in the engagement sessions on the principle of the SBSL included the view that the scope of the SBSL should be aligned with the scope of the CRP (in that the types of developments being levied should align with the types of developments remediated through the Programme).

Similar themes were also raised in meetings of the Expert Advisory Group, including the view that there is a lack of clarity around the scope and cost of the CRP and that this would impact developers’ ability to determine impacts and engage on the detail of the policy. Members of the Group also similarly raised points around cumulative burdens on the house building industry, and the importance of recognising that developers are already contributing towards cladding remediation either through remediation of their own buildings or through paying RPDT.

Scottish Government response

The Scottish Government recognises the general opposition to the introduction of the SBSL but notes that no immediate alternative solutions are being offered by respondents to address the funding challenge associated with cladding remediation.

If the SBSL were not introduced, this would mean a new tax would be applied to residential housing developers in England but not in Scotland. There would be no changes to the existing funding streams to support delivery of the Scottish Government’s CRP. While Barnett consequentials from UK Government spending related to revenues from the RPDT would still be available, it is estimated that the scale of the work required in Scotland will significantly exceed this amount and therefore additional revenue will be required.

On the basis that not fully funding the CRP is not an option, in lieu of the SBSL the Scottish Government would be required to fund the Programme through its existing capital budget envelope or through changes to other devolved taxes. In the context of the devolution settlement and the challenging fiscal context, funding the CRP exclusively from the existing capital budget envelope would require reprioritisation of spending commitments, or future decisions not to allocate capital expenditure to new projects or infrastructure. While the Scotland Act 1998 provides the Scottish Parliament with some powers over taxation, the incidence of these taxes falls largely onto the general taxpayer.

As such, neither of these options would meet Scottish Ministers’ objective of ensuring that there is parity in the funding arrangements between the Scottish and UK governments, and that the costs do not fall directly onto homeowners or disproportionately onto the general taxpayer. It is against these options that the SBSL has been appraised as the best option to deliver Scottish Ministers’ policy objectives.

We agree with the UK Government that it is right that residential property developers are asked to make a fair contribution to remediating unsafe buildings and that is why we too intend to introduce a Building Safety Levy in Scotland. Work on the SBSL has balanced the need to raise revenue for cladding remediation efforts with minimising any potential impact on the housebuilding sector. The Scottish Government is cognizant of the current pressures on housebuilding and the importance of building more homes and will continue to work with industry stakeholders to evaluate potential impacts of the Scottish Building Safety Levy on development viability. The design of the Levy seeks to minimise any impacts while also facilitating adequate funding for Scotland’s CRP, which will rehabilitate existing housing stock and improve the sector as a whole.

Considerations of scope

Question 2: Do you agree that homes delivered through the Scottish Government’s Affordable Housing Supply Programme should be removed from the Scottish Building Safety Levy?

Of those who answered this question quantitatively (40 respondents), the breakdown of views was as follows:

There was strong support for an exemption for affordable housing from other housing/property stakeholders, local government organisations, and individuals. Views were more mixed from property developers and other organisations. A full breakdown of responses by respondent type is set out below:

Impacts

Several responses noted that if the SBSL were to be applied to affordable housing, it would impact the cost, viability, and delivery of these homes. It was also raised by several respondents that affordable housing delivery is already constrained, and that the SBSL would add an additional burden.

“If affordable homes are not excluded it would have the potential to severely restrain the numbers of affordable housing being delivered as they would not be viable.” - Bancon Homes

It was additionally emphasised by a few respondents (including local authorities) that affordable housing provision is particularly crucial and a key priority for rural areas.

However, several other respondents expressed the view that an exemption for affordable housing would substantially distort the tax base (noting the higher provision of affordable housing in Scotland compared to England) and create a higher tax burden on private housing. It was also noted by a few respondents that an exemption for affordable housing would give local authorities and registered social landlords (RSLs) an unfair advantage when competing with private developers for acquisition of land.

It was expressed by many respondents that there are strong interdependencies between the delivery of private and affordable housing, and that even with an exemption, the SBSL may generate knock-on impacts to affordable housing provision due to impacts on the delivery of private housing.

Fairness and responsibility

Some respondents expressed the view that it would be unfair to exempt affordable housing from the SBSL, with a few responses raising that this would allow developers responsible for the problem of unsafe cladding (including private developers delivering affordable housing, and Housing Associations), to avoid contributing to remediation costs.

“A significant number of developments that require remediation have been built by housing associations. By excluding them there is no accountability and is therefore not treating all involved parties fairly.” - Westpoint Homes

Circularity of public funding

Some responses raised that applying the tax to affordable housing would create an issue of circularity in public funding, in that these homes would be delivered via Scottish Government grant funding or local government funding, then taxed to raise revenue for the Scottish Government’s CRP, essentially moving public money from one programme to another.

Capturing all affordable housing delivery

Many responses emphasised the importance of adequately defining ‘affordable housing’ such that it reflects the different ways these homes are funded and delivered, to ensure all are captured under the definition for the purposes of exemption from the SBSL. This included the response from Homes for Scotland, which emphasised that affordable housing transactions can be “complex”, may not all attract Scottish Government grant funding, and may take place in different ways and at different times before, during, or after the processes of development construction and completion. These responses expressed the view that it was important for legislation to adequately reflect this complexity to ensure that developers do not become liable for the SBSL for affordable housing and are not required to take on additional administrative burdens to pursue refunds of the tax.

Alignment with other measures

It was noted that an exemption for affordable housing from the SBSL would align with other exemptions these developments are subject to, for example contributions towards education.

Other

Other specific points were raised by a singular response and so have not been considered in further detail, for example, that the exemption should apply to council-owned homes for social rent only.

Engagement on affordable housing exemption

Participants in engagement sessions raised similar themes on the proposal to exempt affordable housing from the SBSL. These included the importance of adequately defining ‘affordable housing’ to reflect the complexities of its delivery, the interconnectedness of the sector and recognition that affordable housing provision is dependent on the delivery of private housing, and the potential for unfair advantage for local authorities and RSLs in the competition for land.

It was raised in meetings of the Expert Advisory Group that Scotland has a much higher provision of affordable housing than England, and that considerations of the resulting tax burden on private housing should recognise this disparity. The point of complexity in affordable housing delivery and the different mechanisms through which these transactions occur was also noted by the group.

Scottish Government response

The Scottish Government is proceeding with an exemption from the SBSL for new social and affordable housing provided through the Affordable Housing Supply Programme (AHSP), in support of the commitment to deliver 110,000 affordable homes by 2032, of which at least 70% will be available for social rent and 10% will be in our rural and island communities. An exemption also mitigates concerns around local authorities acting as taxpayers for the SBSL and ensures that public funding provided for social and affordable housing is not then subsequently used to pay costs associated with the SBSL.

Furthermore, this exemption mirrors the UK Government proposals for exempting affordable housing from the Levy in England, ensuring there is equal treatment of these developments north and south of the border. The Scottish Government recognises the disparity between the affordable housing provision in Scotland and that in England and is aware of the subsequently greater impact of this exemption on the tax base for the SBSL. When setting rates, Scottish Ministers will consider the complete picture of exemptions for the SBSL.

Question 3: What are your views on the principle of removing smaller developers from charge of the Scottish Building Safety Levy?

This was not a quantitative question, and many comments analysed in relation to this question were from non-standard responses which did not directly answer the questions set out in the consultation. As such, it is not possible to provide a straightforward numerical breakdown of responses, however the analysis notes that the responses generally indicated strong support for removing smaller developers from charge of the SBSL.

Impacts

A significant number of responses emphasised that the cost of the SBSL would have a substantial impact on smaller developers. These responses noted that smaller developers often have lower profit margins, higher build costs, and challenges with cash flow as they are typically unable to access funding models available to larger companies.

“SMEs will self-fund their development without having the access to larger debt financing that larger home builders will have access to. Members report that further regulation will impact their cashflow and ability to deliver more homes...” - Homes for Scotland

Respondents expressed the view that smaller developers would be unable to afford the additional cost of the SBSL, with some raising that smaller developers are already struggling and that there has been a decline in the number of smaller developers and housing provided by these companies. Some respondents reflected on the impact of the SBSL on smaller developers in the context of wider cumulative impacts of multiple existing or proposed policies and regulatory burdens.

Additionally, many of these respondents emphasised that SMEs play a vital role in the provision of housing, particularly in rural areas and on brownfield land (i.e. land which has been previously developed),^[2] and should be supported.

It was also noted in responses however that further consideration of the impacts of an exemption for SMEs would be needed, to ensure there is not a disproportionately high tax burden placed on larger developers.

Fairness and responsibility

Several responses expressed the view that it would be unfair for smaller developers to be subject to the SBSL, as they have typically not been responsible for the issue of unsafe cladding and are often not involved in the construction of the types of buildings requiring remediation (i.e. multi-storey buildings).

“Given the nature of SME businesses it is also highly unlikely that they would have contributed to buildings on the Cladding Remediation Programe [sic] and as such they should not be penalised for the failings of others.” - Bancon Homes

Some respondents (mostly individuals), however, felt that all developers should be included within the scope of the tax to ensure fairness and proportional sharing of the cost. One respondent noted that if the tax is calculated proportionally (i.e. to reflect development value), that there would be no need for an exemption for smaller developers.

One respondent stated that they are in favour of exempting smaller developers from payment of the SBSL, unless they are responsible for the problem of unsafe cladding.

Complexity

A few responses noted the complexity of defining ‘SME’ for the purposes of an exemption, with a couple raising that larger developers may restructure their companies or their development sites to attempt to be covered by the exemption.

Other

Other comments raised by singular responses included the point that imposing the tax on smaller developers would not raise much revenue.

Question 4: If you agree that small developers should be removed from charge under a Scottish Building Safety Levy, what are your views on the method of determining who is a smaller developer?

Exemption by number of units built annually

Several respondents expressed the view that the exemption for small developers should be determined by the number of units built annually. Of those who suggested where the threshold should be set, most agreed with the Homes for Scotland definition of an SME as a home builder which delivers between three and 49 homes per year.

A few respondents expressed that this definition would not be broad enough, and the threshold should instead be set at fewer than 100 units per year, or 200 units per year.

One respondent raised that the extended timeframe of housebuilding and irregular flow of development might result in significant variability of number of developments between individual years, and therefore a longer-term measure (i.e. average completions over five years) may be more suitable than a per annum threshold.

Another respondent raised that larger developers could seek to be included under this exemption by restructuring their businesses to appear as multiple small developers.

Exemption by development size

Some responses stated that the exemption should cover small developments rather than small developers, by excluding developments based on size. Suggestions on where this threshold should be set varied, with a couple of respondents suggesting fewer than 10 units, and another couple suggesting fewer than 100 units. Other suggestions from singular respondents included:

•Fewer than five units

•Fewer than 50 units

•Less than two acres

It was noted that an exemption by development size would align with measures already considered during the planning process.

However, a few respondents expressed concern that an exemption by development size would not necessarily target those the exemption is intended to capture. It was raised that SMEs may take on larger development sites to reduce contact with the planning system, and that a larger site with permission for, for example, 80 homes, may only deliver 20 of those in one year. One respondent expressed the view that an exemption by development size may put larger developments needed in rural areas at risk, given that these developments are typically delivered by SMEs. It was also noted that larger developers may develop smaller sites (or attempt to restructure a larger site into smaller developments) and would then be covered by this exemption.

Exemption by annual profits

Some respondents suggested the exemption should be measured by a profit threshold, with a few (including Homes for Scotland) noting that this would align with the £10m profit threshold that will exclude home builders from the CRP Developer Contract, thus creating consistency across the programme.

A few responses expressed the view that a profit-based exemption may not work effectively, with one stating that figures could be manipulated in order to benefit from the exemption.

Exemption by development type

It was suggested that the exemption should be determined by the types of developments a developer builds. One respondent stated that it should be determined by the proportion of affordable housing a developer delivers, with another stating that SMEs should be exempt if they only build homes of two storeys or fewer.

Other

A few respondents raised the importance of simplicity and certainty for developers in understanding their eligibility for exemption and their liability for the tax. Homes for Scotland, in their response, emphasised the need for clarity on how eligibility will be determined in practice, for example which years would be considered when measuring profits or number of units built.

Other comments raised by singular responses included the point that medium sized developers are unlikely to be considered small enough for exemption but lack access to the funding of a larger developer.

Engagement on SMEs exemption

The position of SMEs and the need for an exemption from the SBSL was a strong focus of engagement sessions with stakeholders. Discussions raised similar themes to those found in the consultation responses, including issues of cash flow, increased pressures on development and business viability, and the question of fairness for SMEs who have typically not contributed to the problem of unsafe cladding. It was also noted in engagement that SMEs would benefit from an exemption rather than a relief, to avoid the administrative burden of filing tax returns for the SBSL. Some participants in engagement sessions expressed a preference for the Homes for Scotland definition of three to 49 units per annum, with a concern that a definition based on size of developments would favour larger developers building smaller sites. A profit-based exemption was also suggested, and it was noted that this would align with the approach taken with RPDT, though it was raised that measuring turnover and revenue could be challenging for SMEs.

It was noted in meetings of the Expert Advisory Group that there is a need for balance between protecting SMEs and ensuring there is not a disproportionate and significant tax burden placed on larger developers. It was raised by the group that the Scottish planning system has a limit of 50 units for a small development, so this may be an appropriate definition, though it was also noted that larger developers can build smaller sites.

Scottish Government response

The Scottish Government recognises that smaller developers may be disproportionately impacted by the introduction of the SBSL, due to the resource needed by businesses to understand, plan, and absorb any additional costs.

Having considered views on these impacts and the most appropriate approach to an exemption, the Bill provides for a levy-free allowance of a certain number of units developed per year, with the threshold to be set by Ministers in secondary legislation. Through provision of a levy-free allowance, the smallest developers who are building low numbers of residential buildings per annum will be protected from the costs associated with the SBSL. While the levy-free allowance would operate equally across all developers, its benefits will be more impactful for smaller developers, as a higher percentage of their developments will not be subject to the SBSL.

In addition, this allowance is intended to ensure that self-build homes are excluded from payment of the SBSL, and the Scottish Government has committed to further engagement with small developers and their representative bodies throughout the legislative process to consider an appropriate threshold level for the protection of small businesses.

Question 5: Are there any other exemptions from the Scottish Building Safety Levy that you think should be considered by the Scottish Government?

Accessible homes

Some respondents expressed that specialist housing designed for accessibility (for example, fully wheelchair accessible homes) should be exempt from the SBSL in order to incentivise the building of these homes and meet the need for their provision. It was noted by one respondent that these homes are currently predominantly delivered by RSLs, and an exemption from the SBSL may encourage private developers to also do so.

Affordable, not-for-profit, and community-led housing

A few responses stated that the exemption for affordable housing should include all forms of affordable housing, and that this should be broad enough to capture all schemes under the AHSP and all affordable homes delivered outside of the AHSP. Relatedly, other responses expressed that self-build, community-led, local authority-led, and not-for-profit developments should also be exempt from the SBSL.

Islands and rural developments

Some responses raised that developments in island communities and rural areas should be exempt to reflect the particular challenges and additional costs for housing in these areas. One respondent noted that due to the types of existing buildings in these areas, they are unlikely to benefit from the remediation enabled by the SBSL and should be exempt on that basis. Another raised that the definition of ‘rural’ would need to be sufficiently broad to capture areas which may be classified as urban or accessible but still have low development viability due to their isolation from construction markets.

Brownfield and re-use of existing buildings

Several respondents expressed that re-use of previously developed land or of existing buildings – including brownfield, refurbishment, and conversions - should be exempt from the SBSL.

“To meet our climate change commitments, and to maintain and enhance our historic environment, it is important to keep buildings in use.” - The National Trust for Scotland

Build to Rent and Purpose-Built Student Accommodation

Respondents proposed an exemption for Build to Rent developments on the basis that the SBSL would discourage investment in these types of properties and stifle the growth of the sector, having particular impacts on areas with housing shortages and a need for rented accommodation. One of these respondents expressed the view that an exemption should be applied to Purpose-Built Student Accommodation also, stating that both development types are unlike homes for onward sale, relying on different timing and financing models with a considerable number of units delivered at the same time for long-term rental income.

Smaller homes

It was noted that there could be consideration of an exemption for smaller homes, with Scottish Borders Council raising in their response that an exemption for single-bed properties would be consistent with their Development Contributions policy. Homes for Scotland noted in their response a suggestion from one member that a lower rate on smaller/starter homes would support the market for first-time buyers.

Transitional arrangements

Some respondents raised that transitional arrangements should be put in place to exempt homes already in the process of development before the introduction of the SBSL, with most of these respondents suggesting an exemption for homes in development in the three years prior. These responses expressed that land acquisition and development viability may be being considered now for developments that could become liable for the SBSL once it is introduced, and that developers should be able to take these financial decisions on current and upcoming projects without having to factor in a cost which is currently uncertain.

“Officials heard in engagement sessions that members report that land for future development and investment for 3+ years hence, are being considered now. Therefore, the land prices and viability of homes are being considered while this consultation is ongoing. Members lack the certainty of potential further regulation at this stage, and these additional costs cannot be accounted for in this pricing.” - Homes for Scotland

Flexibility

Some respondents suggested that the legislation should be flexible such that further exemptions could be introduced after commencement of the tax if appropriate.

Other

Several responses expressed the view that no further exemptions are required beyond those suggested in the consultation, with a few stating that there are too many exemptions proposed or that there should be no exemptions. Some other specific points were raised by a singular response and so have not been set out in further detail, for example, that buildings owned by the Scottish Fire and Rescue Service should be exempt. Other comments were raised which suggested exemptions already proposed in the consultation document.

Question 6: Are there any types of development listed in the exemptions above that you think should not be exempted from the Scottish Building Safety Levy?

Respondents most commonly did not object to the proposed exemptions listed in the consultation. Some, however, noted concerns or disagreements relating to some of these proposed exemptions. The comments raised by these respondents are listed below.

Hotels

Of the responses which disagreed with one or more of the proposed exemptions, the most common objection was to the exemption for hotels. One respondent noted that hotels are different to the other types of developments listed which are designed to support, for example, health and education. This respondent also expressed the view that an exemption for hotels may incentivise the building of hotels rather than housing, when the latter is much needed.

Conversions

A couple of responses disagreed with the proposed exemption for conversions and refurbishments, expressing the view that these conversions have contributed to the problem of unsafe cladding and so should be included in the SBSL to contribute to the cost of remediation.

Private care homes and hospitals

A few respondents disagreed with the proposed exemption for non-NHS hospitals and residential care homes, on the basis that these should be included within scope if they are private and for-profit developments. One respondent noted that residential developers would be at a disadvantage competing with these private providers for land if these developments were to be exempt from the SBSL.

Religious accommodation

A few responses from individuals disagreed with the proposal to exempt religious accommodation such as monasteries and nunneries.

Responsibility

A few responses expressed the view that inclusion or exclusion from the SBSL should not be based on developer or development type, but rather responsibility for the problem of unsafe cladding.

Other

Other comments raised by singular responses included the view that military establishments should not be exempt. Other comments disagreed with exemptions that were not proposed in the consultation document.

Question 7: Do you have any comments on exemptions not covered by this consultation that you wish to raise?

The most common response to this question was to offer no further comments on exemptions. Of those which did give further comments, many of these were repeating or reiterating the points set out in the analysis of the previous two questions and so those have not been set out again here.

Mechanism to protect development viability

It was raised that there should be a discretionary mechanism to exempt developments from the SBSL if evidence can be provided that the cost of the tax would make a site unviable.

Other

Other points raised by a singular response included the view that consideration of exemptions must take into account potential competitive advantages.

Engagement on other exemptions

It was raised in engagement sessions that there should be alignment between the scope of the tax and the scope of the CRP, in that the types of developments being levied should align with the types of developments being remediated with revenue raised from the SBSL.

It was noted in meetings of the Expert Advisory Group that there is a need for a balance between exemptions and the resulting tax burden on the rest of the industry. It was suggested by one member of the group that an exemption for bungalows should be explored on the basis that it would be positive to incentivise these developments and that these types of homes did not contribute to the problem of unsafe cladding.

Scottish Government response

The Scottish Government welcomes the input from respondents on exemptions from the SBSL and understands the need for balance between ensuring the Levy is effective as a revenue-raising measure while avoiding disproportionate impacts on particular types of residential developments.

The Scottish Government considers that all residential development on Scotland’s islands should be exempt from the SBSL, reflecting the housing challenges faced in these areas which may be exacerbated by including island developments within scope. Potential impacts on island communities of the SBSL Bill are considered in full in the Island Communities Impact Assessment prepared for the Bill, which is available on the gov.scot website. The Scottish Government recognises that many of the issues which affect islands may also apply to development in mainland rural areas. However, discussions with island stakeholders have identified an element of greater complexity in housebuilding on islands, where contractors are largely restricted to those available on the islands themselves and supply chains are reliant on shipping arrangements. As such, the risk of market failure is more acute on islands. In addition, unlike islands, there is not a clear statutory definition of what constitutes a rural area and rural stakeholders have raised concerns on the appropriateness of existing definitions in sufficiently capturing the challenges to rural housebuilding. The Scottish Government will continue to consider the merits of an exemption or relief for rural developments throughout the legislative process, in discussion with stakeholders.

The Bill also sets out those buildings that are considered outwith scope of the SBSL. These buildings are:

•Hotels, inns or similar establishments

•Residential accommodation for children

•Residential accommodation for persons in need of personal care, such as care homes, drug and alcohol treatment centres, and mental health facilities

•Hospitals and hospices

•Military barracks and other residential facilities provided to members of the armed forces and their families by or on behalf of the Secretary of State for Defence

•Prisons and similar establishments

•Residential accommodation for school pupils

•Residential accommodation for religious institutions where the work of a religious denomination is carried out, such as nunneries and convents

•Accommodation for asylum seekers and their dependents

It is the Scottish Government’s view that the types of buildings listed above are not within scope of the policy aim for the SBSL. Hotels, inns or similar establishments (such as hostels and aparthotels) are commercial entities which provide temporary accommodation – usually for business or leisure purposes – these buildings are distinctly different from the long-term accommodation types the SBSL seeks to charge. Additionally, the Scottish Government’s CRP is not intended to cover commercial entities such as hotels.

The remaining exempted building types are what the Scottish Government considers to be ‘residential institutions’, where the provision of accommodation is for a purpose that is additional to a residence. These community facilities provide accommodation to people in need of care or used as a residential education facility. The Scottish Government is not aware of instances where an existing residential facility requires remediation on cladding. The UK Government proposes to exempt residential institutions from its levy, and the list of exempted provisions in the Bill has been aligned to these proposals to ensure regulatory alignment between levies.

The Scottish Government recognises that Build to Rent and Purpose-Built Student Accommodation developments are a distinct part of the residential development sector. The Build to Rent market in particular remains in relative infancy, currently comprised of high-density developments in Scotland’s urban areas. While an exemption of Build to Rent from the SBSL could represent a removal of barriers for a relatively small proportion of overall construction at current market levels, the small-scale nature of the SBSL means it is not clear that an exemption for Build to Rent would provide a desired stimulus effect on the market. On this basis, the Scottish Government propose to include Build to Rent developments within scope of the SBSL but will continue to explore with industry stakeholders the merits and benefits of an exemption or relief for such developments as the Bill progresses.

The Bill will give Ministers the power to amend the list of buildings that are exempt from the levy, through secondary legislation, which will allow for further changes to be made if required to the scope of the levy. In addition, the Bill gives Ministers a power to introduce reliefs from the levy for certain types of residential development, by secondary legislation. The flexibility provided by these powers will allow the levy to respond promptly to changes in the housebuilding sector.

Considerations of calculation

Question 8: Do you agree that the rate of the Scottish Building Safety Levy should be calculated as a proportion of the market value of the property?

Of those who answered this question quantitatively (37 respondents), the breakdown of views was as follows:

Those who opposed a market value calculation were predominantly developers, with several individual respondents also opposing (though for the latter, this mostly stemmed from a general opposition to the principle of the SBSL rather than to this specific calculation option). Those in favour of this approach were mostly other housing/property stakeholders and local government organisations. A full breakdown by respondent type is provided in the table below.

Fairness and proportionality

Responses varied on whether a market value approach to calculation would be fair and proportionate.

Several responses expressed that a calculation approach based on market value would be a sensible and fair approach which would avoid disproportionate impacts, for example on smaller units, and would reflect regional variations in property value. This was often referenced in comparison to the perceived unfairness of a flat rate calculation method, with a market value calculation better aligning with progressive taxation principles.

“We agree with the Scottish Government analysis that the market value approach...can allow for a progressive approach to taxation and that it will reflect house price disparities across the country.” - Scottish Federation of Housing Associations

This was expressed by some respondents as particularly relevant for rural areas, where a market value calculation would reflect lower market values for homes in these areas.

However, it was the view of some respondents that a higher market value is not necessarily indicative of higher profitability for the developer, for example due to build costs being higher in rural and remote areas.

“It is suggested that the levy should be calculated as a proportion of market value, or sale price where possible, because it has advantages which include the fact that it will be proportionate to any revenue generated through the sale of the property. We would suggest this may not always be the case, as it doesn’t necessarily reflect the differing costs faced by developers in different areas.” - Scottish Borders Council

Ease of calculation

Some respondents favoured a market value approach on the basis that this would be straightforward to calculate and administer, providing a tangible method of calculation that may be less complex than other options, given that data on sale price is already known.

“...this is the simplest approach... a square meter basis could be more onerous to calculate, verify and securely retain evidence for audit.” - The Royal Incorporation of Architects in Scotland

However, a greater number of respondents expressed the view that there are complexities in determining market value, particularly in cases where homes are not for onward sale (such as Build to Rent developments). In these cases, there would be no sale price, and an alternative valuation would be required, which some respondents noted may be difficult to determine and may be inconsistent.

“...if the intended scope of the tax is to encompass all forms of residential development such as PBSA [Purpose-Built Student Accommodation] and Build to Rent then this adds the complexity of at what point to charge because the building will be rented rather than sold to individuals/ households, and the actual point of sale of the investment is likely to have been when it was a development site before construction.” - Scottish Property Federation

One respondent expressed the view that this would constitute a fairness issue, with developers building homes not for onward sale potentially being able to manipulate valuation figures.

It was also noted by respondents that 'extras’ and ‘incentives’ offered by home builders to support sales (such as payment of Land and Buildings Transaction Tax (LBTT) or furnishing packages) would require further consideration with regards to determining the market value of a property.

Stability and certainty

Several responses emphasised the importance of stability and certainty in a tax calculation approach, expressing a view that a market value calculation does not provide this certainty. It was raised that the property market can be subject to volatility, with one respondent noting that market changes resulting from various external factors could significantly impact rates of the SBSL and the revenue generated. It was also raised that market values can fluctuate over the lifetime of a project, and therefore that a market value approach would make it difficult for developers to factor the cost of the SBSL into their financial planning and projections at the beginning of a development.

“A home can take three years to build from planning, and sale price may be uncertain throughout that period; instead, a developer would want to know any likely liability at an early stage...” - Homes for Scotland

One respondent (a developer) noted however that some level of uncertainty is inherent in the housebuilding process, and that the uncertainty from a market value approach would be similar to the assumptions around sale price developers already must make in their development appraisals.

Impact on building in certain areas

Some responses raised the view that a market value calculation approach would distort the delivery of homes in certain areas, disproportionately impacting the delivery and affordability of homes in higher market areas (perhaps with high pressures on housing availability) and incentivising building in others.

“A levy based on market value of a home will result in more marketable areas being penalised and could then result in affordability issues in those areas. This approach is not a fair one.” - Bancon Homes

Views on alternative calculation methods

A significant number of respondents focused their response to this question on alternative methods of calculation, and why these options would be preferable to a market value calculation approach. These responses which discuss alternative calculation methods which Question 11 specifically invites views on (flat rate per unit, size of property, number of bedrooms, and construction costs) have been analysed and considered alongside responses to that question.

Four respondents offered suggestions for alternative methods of calculation that were not included in the consultation paper. These were:

•A methodology aligned with that which is used to determine affordable housing contributions

•A calculation in proportion to developers’ level of responsibility for unsafe cladding

•Two suggestions which either misunderstand or disagree with the principle of applying the SBSL to new residential construction, and instead advocate a calculation approach related to remediation works:

Other

Other points raised by singular responses included the view that the calculation approach should align with that of the England-only Levy to ensure parity between Scotland and England, particularly for administrative ease for developers operating north and south of the border.

Engagement sessions on market value calculation approach

Participants in engagement sessions noted that a market value approach would align with the approach taken for LBTT. However, participants raised similar concerns and complexities around a market value calculation, including the difficulty in establishing value of developments not for onward sale (and who should administer and cover the cost of these valuations), and the lack of certainty for developers in understanding their tax liability from the beginning of a development project.

Views from the Expert Advisory Group were more mixed, with certain members strongly preferring a market value calculation approach on the basis of fairness and proportionality, and the group noting that this would align with LBTT and other percentage-based costs for developers.

Question 9: In cases where a property is not sold on the open market, what alternative valuation could be used to calculate the Scottish Building Safety Levy to ensure proportionality with the market value of the property?

Independent valuations

Several responses to this question expressed that where a property is not sold on the open market, a valuation should be obtained from an independent valuation or assessment process. Some respondents offered more specific ideas on who should carry out this valuation or what measure should be used, including:

•Royal Institution of Chartered Surveyors, and/or their existing valuation measures and processes

•Scottish assessors

•Estate agents

•Land professionals

"We have produced a Professional Standard for the valuation of property purpose-built for renting: Valuing residential property purpose built for renting, 1st edition, which sets out the general approach to valuation that should be adopted for the build-to-rent part of the residential investment sector...” - Royal Institution of Chartered Surveyors

One respondent noted that if developers were to be required to undertake a valuation of their properties for the purposes of tax calculation, that this would constitute an additional cost.

Construction costs

A few respondents suggested that construction costs could be used as an approximation of market value, with one respondent suggesting that a combination of land price and construction value may be an equivalent to market value.

Other

Some other points were raised which either appeared to misunderstand the question (for example, considering calculation options for properties where the sale price is not yet known but will be known once sold), or did not relate to the specific question asked, including expressing opposition to the market value calculation approach.

Engagement sessions on alternative valuations

It was raised in engagement sessions that the requirement to carry out a valuation for a property not for onward sale would constitute an additional cost, with some stakeholders querying how this would be paid for and by whom.

It was discussed by the Expert Advisory Group that valuation reports by professional surveyors could be used, with another proposal to use the Building Costs Indexes System, though it was noted that this is more reflective of construction costs than market value. It was the view of the Expert Advisory Group that alternative valuations would be relatively easy to carry out for developments not for onward sale.

Question 10: In relation to Question 9, do you have any information on valuations undertaken during the building standards process that would be useful for the Scottish Government to consider?

Many respondents to this question stated that they did not have any information to offer on valuations undertaken during the building standards process.

Build costs

Several respondents noted that valuations of build costs are undertaken as part of the building warrant application process. However, it was noted that this valuation relates only to the costs of construction rather than constituting an approximation of sale or market value.

The response from the Scottish Property Federation noted that one consideration could be quantity surveyor estimates of construction costs which factor into the overall value of a development investment.

A few respondents noted that these valuations of build costs are not always accurate and do not always reflect the true construction value at the end of a development.

Other

Some other points were raised which did not relate to the specific question asked, including expressing opposition to the market value calculation approach.

Question 11: What are your views on using one of the following alternative methods of calculation for the Scottish Building Safety Levy: Flat rate per unit; Rate based on the size (per square metre) of the property); Rate based on the number of bedrooms of the property; Rate based on the cost of building works of the property. Please give us your views

As this was not a quantitative question, and many responses did not indicate a clear or sole preference for one of these options (with several discussing advantages and disadvantages of each approach), it is not possible to provide a numerical breakdown of straightforward support for these calculation methods. This reflects the recognition of complexity with all calculation methods and the mixed views from stakeholders.

This section will consider views on each of these alternative methods of calculation in turn, looking across responses given to this question and to Question 8 to summarise key themes on each approach.

Flat rate per unit

Simplicity and certainty

Several respondents favoured a flat rate per unit approach on the basis that this would provide simplicity and certainty for developers and allow them to understand their tax liability from the beginning of a development project and factor this cost into their financial planning.

“Members have expressed a general preference for a flat rate per home to have certainty about their liability for any levy at an early stage” - Homes for Scotland

A few respondents also noted that a flat rate per unit approach would be simpler for calculation and administration purposes.

Fairness and proportionality

Several other respondents, however, opposed a flat rate per unit calculation on the basis that this would be unfair and disproportionate, particularly for smaller homes and for homes in lower market-value areas, particularly remote and rural areas.

It was raised by some respondents that any calculation method should account for geographical context, with Homes for Scotland suggesting in their response that consideration be given to a tiered or regionalised flat rate approach.

Rate based on size (per square metre)

Impact on the size of new homes

Some respondents expressed the view that a rate based on size would incentivise developers to build smaller homes. Within this, it was noted by a couple of respondents that this potential impact would conflict with recent minimum space standards proposals on improving accessibility and useability of Scotland’s homes.

This point was noted in the response from Homes for Scotland, who also noted a view from some members that conversely, a flat rate per unit calculation may disincentivise the building of smaller, more affordable homes in favour of larger and higher-value properties.

Complexity

A few respondents noted that a rate based on size (per square metre) may generate complexity and costs for calculation and administration, in terms of determining the area to be measured and what evidence would be needed to support the calculation.

“A per square meter charge will need calculation and appropriate guidance on what is being measured and the evidence to be retained, e.g. architectural drawings. This will add cost and complexity.” - The Royal Incorporation of Architects in Scotland

Fairness and proportionality

While some respondents characterised a rate based on size as a fair and equitable approach (with a few stating that this would generally reflect the value of a property), a few others expressed that this approach does not account for regional variation and would require further consideration of differing impacts by geographic context.

Rate based on the number of bedrooms of a property

Alignment with existing measures

A few responses noted that a calculation approach based on the number of bedrooms of a property is used elsewhere in the building standards process to establish planning contributions, therefore this approach for the SBSL would create alignment between these measures and be understood by and give certainty to developers.

Definitions of bedroom

A few respondents noted there could be complexities in determining the definition of a ‘bedroom’ for the purposes of tax calculation, given that several rooms (such as a home office) may be easily repurposed as a bedroom by the occupier.

Fairness and proportionality

A few responses expressed the view that a calculation approach based on the number of bedrooms of a property would be a fair approach, with a couple stating that this would generally reflect the value of a property.

However, other respondents expressed the view that this approach would not account for variations in geographical context or reflect differences in the size of a property with the same number of bedrooms.

Rate based on the cost of building works of the property

Complexity

Several responses expressed the view that it would be difficult to accurately determine and evidence the cost of building works of a property, thus introducing variation in calculation and complexities in administration.

However, one respondent noted that a cost of building works calculation approach can be applied across all development types, thus avoiding the complexity with a market value approach and homes not for onward sale. Another respondent expressed the view that cost of building works is more quantifiable and a more empirical measure than other approaches.

Fairness and proportionality

While one respondent characterised cost of building works as a proportionate calculation method, others expressed the view that this method does not necessarily account for regional variation. These respondents noted in particular that higher build costs do not necessarily indicate higher margins and profits, as some developments may carry higher build costs (such as sites in remote and rural areas, or brownfield sites) while also having lower margins. One of these respondents suggested developments in rural areas where construction costs are higher should attract a low or zero tax rate.

Other themes

Advantages and disadvantages to all calculation methods

Several responses reflected on the benefits and disbenefits of all calculation methods, with a couple of responses noting that there are complexities with all methods, and that no one option will suit all developers. One respondent expressed the view that the calculation method should consider a combination of factors, with another characterising all options as reasonable.

Other

Some other points raised by a singular response included, for example, the view the calculation method should be linked to the number of residents affected by unsafe cladding.

Engagement sessions on alternative calculation approaches

Similar themes on alternative approaches to calculation were raised in engagement sessions, with several participants expressing a preference for a flat rate per unit calculation method in order to ensure simplicity and certainty for developers in calculating their tax liability from the beginning of a development project. However, others raised that this calculation method would be disproportionate compared to the cost and value of the property and could have significant impacts on development viability in areas where house prices are lower.

Views from the Expert Advisory Group were mixed and evolved over time as development of the policy became clearer. It was initially the view of the Expert Advisory Group that sale price was preferred as a calculation method where possible, or an alternative valuation method for developments not for onward sale. Later discussions reflected that a market value approach generates uncertainty for developers, while also noting that a floorspace calculation approach could have an effect on space standards of new homes. It was also noted by the Group that if there is to be geographical variation in rates there must be national consistency in preparation and timing for any rate changes.

Scottish Government response

We recognise the need for the housebuilding industry to have stability and certainty in understanding and calculating their tax liability, and we are responsive to concerns raised around the complexity of a market value approach for properties not for onward sale, such as Build to Rent developments.

Therefore, the SBSL will be charged as a proportion of the total floorspace of the relevant residential property, multiplied by the applicable levy rate. It is our assessment that a floorspace calculation approach strikes the correct balance between proportionality and ease of calculation, reflecting the difference in value between properties of different sizes while maintaining a tangible basis for calculation that is known for properties of all types.

To reflect regional differences in market values, the Scottish Government intends to set different tax rates based on average property prices in different geographical areas. This ensures the SBSL is responsive to the need for progressive taxation and to avoid disproportionate impacts on certain areas where house prices are lower.

This approach also aligns with the UK Government’s proposals for its Building Safety Levy in England.

Question 12: Do you think there should be a different rate applied on brownfield developments?

Although this question was not asked quantitatively, half of the 40 total responses given definitively agreed that there should be a different rate applied to brownfield developments (with 3 of these supporting an outright exemption) and 10 respondents definitively disagreed. Other responses were either unrelated to the question or offered more mixed views on the proposal for a different rate for brownfield developments. The key themes found from all responses are set out below.

Incentivising brownfield development

The most common theme in response to this question was that a reduced rate would incentivise development and re-use of brownfield land. Some responses stated that this would be in accordance with National Planning Framework 4, which encourages brownfield development.

“Yes. NPF4 sets out a policy intent to encourage, promote and facilitate the reuse of brownfield, vacant and derelict land and empty buildings, and to help reduce the need for greenfield development.” - Built Environment Forum Scotland

However, a few respondents expressed the view that attempting to introduce this additional policy aim into the SBSL would dilute the effectiveness of the SBSL, with one respondent stating that a reduced rate would over-restrict the tax base, and other respondents raising that more holistic work would be needed to encourage brownfield development.

Challenge and cost of brownfield development

Many responses also noted the additional challenges, complexities, and costs associated with brownfield development, expressing the view that a reduced rate of the SBSL would help to mitigate these costs and avoid challenging the viability of these sites. It was also noted by one respondent that SMEs undertake the majority of brownfield developments, therefore these costs and challenges may be more significant for these businesses.

“As noted above the cost of developing brownfield sites is significantly more than greenfield, and can run into millions on small developments, therefore the risk profile of the development is higher and margins in some cases will be lower.” - Westpoint Homes

Impacts

A few respondents expressed the view that a reduced rate for brownfield developments may introduce unintended impacts on the housebuilding market. It was stated that this could create distortion in the market.

Another respondent noted that due to very little brownfield being available in rural areas, and costs already being higher in these areas for greenfield development, an effectively higher rate for greenfield development could have a disproportionate impact on housebuilding in these areas.

Further consideration needed

Some responses indicated that they could possibly support a reduced rate for brownfield developments, but further information and consideration would be needed to properly assess this proposal, including:

•The cost of the SBSL

•The level of discount to be applied

•The impact on revenue collected from the SBSL

•The viability and margins of brownfield sites (with one respondent suggesting developments could be assessed on a case-by-case basis to evaluate the need for a reduced rate)

Other

Other points raised by a singular response included the view that if a reduced rate is to be applied, this should be implemented as simply as possible.

Engagement sessions on brownfield development

The Expert Advisory Group raised that consideration should be given to active incentivisation of brownfield development, in alignment with National Planning Framework 4.

Scottish Government response

The Scottish Government will consider the merits of a reduced rate for brownfield ("previously developed land") as part of its consideration on setting rates for the SBSL, and in discussions with stakeholders.

Source page 4

Part B of the consultation document focused on operational considerations for the tax. These sections set out and invited views on the following:

•Taxable event

•Revenue authority

•Returns

•Compliance

•Appeals

•Duration

Taxable event

Question 13: Do you agree that liability for the Scottish Building Safety Levy should arise in relation to the issuance of acceptance of a completion certificate?

Of those who answered this question quantitatively (37 respondents), the breakdown of views was as follows:

Developers, local government organisations, and other organisations (including other housing/property stakeholders) were generally in agreement that liability for the SBSL should arise in relation to the issuance of acceptance of a completion certificate. Views from individuals were more mixed. A full breakdown by respondent type is provided in the table below:

Finalisation of building works

Several responses expressed that liability arising at completion would be a sensible and logical approach, with the issuance of a completion certificate being a clearly defined milestone at which point the building works would be finalised. It was noted that this point would provide some certainty around calculating the tax, as the value, size, and other characteristics of the development may have changed throughout the construction process.

Delays and cash flow

Several responses emphasised that while liability for the tax may arise upon issuance of a completion certificate, this should not be when payment of the tax is due. It was raised that there should be no active conditionality between the payment of the tax and the issuance of a completion certificate, as this would have the potential to create delays and problems with cash flow in an already complex process of development completion and sale. It is worth noting that a few responses appeared to misunderstand ‘liability’ for the tax as the point at which payment would be required, and disagreed with the proposal on this basis.

Respondents highlighted that the overall funding of development sites is often reliant on the sales of the first homes completed, and that any delay to completion or requirement to pay for the tax at that stage would make other developments unviable.

“Under no circumstance can administrative requirements of the SBSL hold up the completion process, including waiting for confirmation of payment from the tax authority. The interdependencies between completion of process and sale can already be complex and challenging, or even fraught and stressful... Members preference would be for payment of the levy to be permitted upon completion of the development. This would also assist with cash flows and provide further protection to SMEs and reduce administrative burden.” - Homes for Scotland

A few respondents noted that setting the liability (but not payment) at issuance of a completion certificate, therefore late in the development process, would aid developers (particularly SMEs) with cash flow, though it was also noted this would be better if liability arose at sale. One respondent noted that connecting liability for the tax with the completion certificate may incentivise developers to avoid applying for a completion certificate if the property has not yet sold, to avoid issues with cash flow.

Local authority resource

A few responses raised that determining liability at the taxable event should not place any additional burden on local authorities without providing them with additional resource, with one respondent noting that existing processes should be used where possible.

Absence of completion certificate

A few responses noted the need to consider liability for the SBSL in cases where a property is occupied without a completion certificate, for example if a temporary occupation certificate is issued.

Other

Other points were raised by singular responses, for example that for some properties (for example, show homes), a completion certificate will be issued but they will not be sold.

Engagement on taxable event

The Expert Advisory Group noted that a single payment point late in the development process would be preferable for reasons of cash flow. It was also noted that developments may be started but never completed, and connecting the tax to the completion certificate would avoid tax being applied to unfinished developments.

Revenue authority

Question 14: Do you agree that Revenue Scotland should act as the revenue authority for the Scottish Building Safety Levy?

Of those who answered this question quantitatively (37 respondents), the breakdown of views was as follows:

Developers, local government organisations, and other organisations (including other housing/property stakeholders) were generally in agreement that Revenue Scotland should act as the revenue authority for the SBSL. Views from individuals were more mixed. A full breakdown by respondent type is provided in the table below:

Centralisation

Several responses expressed the view that Revenue Scotland acting as the revenue authority for the SBSL would ensure the process is centralised and nationally consistent. Respondents also noted that a centralised collection authority would avoid placing an additional burden on local authorities and on the building control process.

Conversely, a few respondents expressed that local authorities should administer the SBSL, with some stating that it would be more efficient to add to the existing building control process, and another raising that this would be consistent with the approach in England.

Resource and expertise

Respondents expressed that it would be a sensible and logical approach for Revenue Scotland to act as the revenue authority for the SBSL, and that they have the necessary resources, expertise, and compliance powers already in place to administer the SBSL efficiently.

Alignment with other devolved taxes

Some responses noted that Revenue Scotland acting as the revenue authority for the SBSL would align with their operation of other devolved taxes in Scotland.

One respondent also noted that it is important Revenue Scotland are given adequate resources to fulfil these additional tax administration responsibilities.

Other

Some other specific points were raised by a singular response and so have not been considered in further detail, for example, that the SBSL should be managed at a UK level.

Returns

Question 15: Which of the following schedules do you think is the most appropriate for the frequency of returns:

a) Per unit

b) Monthly

c) Quarterly

Please give reasons for your answer.

Of those who answered this question quantitatively (32 respondents), the breakdown of views was as follows:

Developers and local government organisations strongly preferred a quarterly schedule for returns. Views from other organisations and individuals were more mixed between quarterly and per unit. A full breakdown by respondent type is provided in the table below:

Administrative burden

Many responses expressed that a quarterly returns schedule would be the least administratively burdensome and would align with that of other taxes and regular administrative processes.

Conversely, a few respondents stated that a per unit returns schedule would be more administratively simple, as it would tie the return to the completion and make payment dates clear.

It was noted that monthly returns would be onerous.

Efficiency and cash flow

Some responses noted that a quarterly returns schedule would be efficient and would assist with cash flow, reflecting the pace of housing development and delivery and providing a longer returns and payment period to allow for the completion and sales of developments.

A few respondents expressed that half-yearly or annual returns would be preferable, to maximise alignment with development profit profiles and minimise cash flow issues.

Other

Some other comments were raised on returns more generally but not in reference to the specific question of frequency. This included a couple of respondents noting that there should be a provision to edit tax returns within a given time frame, if previous information given was not yet finalised. This also included a couple of respondents re-emphasising the preference for payment to be due after completion of a development.

Some other specific points were raised by a singular response, for example, that any increased administration costs for paying the SBSL could be passed on through house prices.

Engagement on frequency of returns

The Expert Advisory Group did not hold a strong view on the frequency of returns, expressing a preference for quarterly or monthly but noting a per unit option could work without significant difficulty, as there is an e-portal which could facilitate real-time processing. A question was raised in the group about synchronizing returns with planning levies, which are paid six months in arrears.

Compliance

Question 16: Do you agree that, in relation to a Building Safety Levy, the tax authority should have the investigatory and enforcement powers set out above?

Of those who answered this question quantitatively (33 respondents), the breakdown of views was as follows:

Developers, local government organisations, and other organisations strongly agreed with the proposals for investigatory and enforcement powers in relation to the SBSL. Views from individuals were more mixed. A full breakdown of views by respondent type is set out in the below table:

Some responses simply expressed that the proposed investigatory and enforcement powers seem reasonable for compliance purposes and in line with what would be expected for any tax.

Clarity for taxpayers

Respondents noted the importance of clarity in this area for taxpayers, expressing that the investigatory and enforcement powers for the SBSL should mirror those of existing Scottish taxes or that any variations should be consulted on and made clear. One of these responses also noted that the revenue authority should communicate their approach to penalties clearly to taxpayers.

Protections for taxpayers

A few responses focused on the need for taxpayers to be protected and for powers to be applied proportionally and fairly. One respondent raised that the revenue authority could take a ‘light touch’ approach to compliance initially following introduction of the SBSL, also noting that penalties should not be applied to late nil-returns where no tax is due. Another respondent expressed the view that the compliance approach should seek to protect the viability of businesses, noting the risks involved with housing development and the potential for unforeseen issues to impact cash flow.

Other

Respondents who disagreed with the proposal for Revenue Scotland to act as the revenue authority for the SBSL therefore disagreed with the proposed investigatory and enforcement powers, expressing the view that compliance should be part of the local authority building control process. Some other specific points were raised by a singular response, for example, that these powers should not be needed as the process of paying the SBSL should be sufficiently clear.

Question 17: Do you agree that there should be no active conditionality between the issuance of each completion certificate and payment of the Levy?

Of those who answered this question quantitatively (32 respondents), the breakdown of views was as follows:

Developers, local government organisations, and other housing/property organisations strongly agreed that there should be no active conditionality between the issuance of each completion certificate and payment of the SBSL, in that the former should not be contingent on the latter. Views from other organisations and individuals were more mixed. A full breakdown of views by respondent type is set out in the below table:

Timing and cash flow

Some responses raised that active conditionality between the issuance of the completion certificate and payment of the SBSL would add delays and burdens to the process of house purchasers moving into the property.

“...there could very well be purchasers imminently expected to occupy the home, who will have invested considerable personal resource, time and effort for their new home. The BSL should not be a reason for causing delayed entry and occupation of the home.” - Scottish Property Federation

Relatedly, one respondent noted that delays to sales could impact cash flow and subsequently affect the ability to pay the SBSL.

Separation of processes

A few respondents expressed the view that the process of paying the SBSL should not be introduced into the process of building standards, as these are legislatively distinct areas. One of these respondents stated that issuance of a completion certificate should be solely dependent on compliance with building standards, rather than being connected to any other conditions.

Alternative sanctions

It was noted that alternative sanctions could or should be imposed for non-payment of the SBSL, rather than relying on active conditionality between the completion certificate and payment.

Necessity of conditionality

A few responses stated that active conditionality is necessary for the payment of the SBSL. These expressed their view that the process should follow the principle of paying for something before it can be obtained, with one noting an example that developers must pay for a building warrant.

Engagement on active conditionality

It was noted by the Expert Advisory Group that while active conditionality between issuance of a completion certificate and payment of the SBSL would support compliance, this could create additional burdens for the process of completion.

Question 18: What are your views on introducing additional sanctions for taxpayers where Revenue Scotland deem there to be persistent or major non-compliance in paying the Levy?

Some responses simply expressed that the proposal for additional sanctions in cases of persistent or major non-compliance would be an acceptable and appropriate approach. Some responses were stronger in their support for additional sanctions, expressing the view that these would be vital to tackle and deter repeated and persistent non-compliance.

Proportionality and impacts

Several responses raised the importance of sanctions being applied in a proportionate and fair way, with some also emphasising that consideration of the impact of sanctions on businesses would be required. It was expressed by a few respondents that these sanctions should not be applied to developers who may have a genuine misunderstanding of or dispute over their liability, or who may be struggling with the introduction of the SBSL. One respondent suggested an approach of ‘graduated sanctions’ which increase with each offence to ensure proportionality.

A few responses noted the suggestion in the consultation that local authorities could withhold access to the building standards system for developers that are persistently non-compliant, with a few expressing the view that this proposed penalty could have significant impacts on businesses and the delivery of new homes while not alleviating any business or cash flow issues which may be preventing payment. Local Authority Building Standards Scotland, in their response, stated that this proposed penalty would require careful consideration, appropriate resourcing for local authorities, and robust and effective legislation.

Clarity

Some respondents sought additional clarity on how these additional sanctions would be determined and applied in practice, with a few specifically seeking clarification on how ‘persistent or major non-compliance' would be defined. It was noted that any sanction mechanisms should be clear and transparent, with a few responses also stating that these mechanisms should align with those of existing Scottish taxes.

Existing mechanisms

A few responses noted the need for sanctions in cases of persistent or major non-compliance but expressed the view that existing mechanisms should be sufficient to tackle these cases, rather than there being a need to introduce additional sanctions.

Other

Other comments raised by singular responses included the view that active conditionality between the completion certificate and payment of the SBSL would be sufficient to deter non-compliance, that interest rates could be applied to the unpaid Levy, and that non-financial sanctions would be necessary as financial sanctions would not significantly impact larger businesses.

Question 19: Are there specific aspects of the housebuilding industry that may require a different approach to compliance than set out above?

Around one third of respondents who answered this question responded that they had no further information or comments to offer on this point. Some responses appeared to misunderstand the question and provided comments and views on the housebuilding industry in relation to the SBSL more generally, rather than in relation to the approach to compliance.

Facilitation of payment and protection of viability

Some responses highlighted that private housebuilding is procyclical, in that it is responsive to wider market and economic conditions, increasing in times of economic growth and decreasing in times of wider economic difficulty. These responses expressed the view that the compliance regime for the SBSL should be geared towards protecting the health of the sector (therefore also protecting the tax base) and should include mechanisms to support ongoing viability and cash flow for businesses. It was suggested, for example, that deferrals or reliefs could be put in place in cases where a developer can demonstrate that payment of the SBSL will constitute a substantial risk to their business.

“A ten-year period will see changing market conditions. Therefore, protections must be in place to protect the health of the sector, particularly for smaller businesses. This includes the Scottish Government overseeing a regime that enables home builders to have sufficient cashflow to prioritise new home delivery.” - Barratt Redrow PLC

Differences in housing delivery models

While one respondent expressed the view that compliance should be enforced equally to all in the housebuilding industry, another noted the differences in the delivery model of Build to Rent and Purpose-Built Student Accommodation developments as compared to homes for onward sale. This response highlighted that these developments would have a higher number of units being delivered at once, therefore incurring significant compliance requirements, and noted that the revenue authority should be cognizant of this different housing delivery model.

Appeals

Question 20: Do you agree with our proposals for dispute resolution in relation to the Scottish Building Safety Levy?

Of those who answered this question quantitatively (32 respondents), the breakdown of views was as follows:

Developers, other housing/property stakeholders, and local government organisations generally strongly agreed with the proposals for dispute resolution. Views from individual respondents were more mixed. A full breakdown of views by respondent type is set out in the below table:

Some responses simply expressed that the proposals for dispute resolution seemed to be a reasonable approach.

Capturing complexities and issues

It was noted that the proposed dispute resolution processes would enable complexities, variations, and common issues arising during the implementation of the tax to be captured and allow for the SBSL to be refined.

Fairness and trust

Responses raised the importance of developers being able to appeal decisions, with one of these emphasising that this would foster fairness and trust in the process.

Avoiding disputes

It was suggested that mechanisms should be put in place to avoid disputes occurring, with one stating that the costs and processes of the SBSL should be clear upfront, and another highlighting the importance of employing early intervention techniques to avoid escalation into disputes.

Other

Other comments from singular responses included the view that the appeals process should align with existing processes to avoid additional administrative burdens.

Duration

Question 21: What are your views on having a sunset clause or end date for the Scottish Building Safety Levy?

Use of revenue

Many responses expressed the view that a sunset clause or end date should be implemented for the SBSL, and that the revenue raised should be used for cladding remediation only with the tax ending once those associated costs have been met.

“At the outset there must be a clear aspirational amount for the BSL to raise to remedy the unsafe cladding. Once that amount has been raised and cladding remedied the requirement for BSL should end. Failure to have such a clause may result in monies not needed being unfairly obtained from the development industry.” - Bancon Homes

A few respondents noted specifically that the SBSL should not be in place for longer than ten years, with another stating that the SBSL should be progressively wound down as the cost of remediation decreases. One respondent stated that the revenue raised should be spent on remediation in a timely manner and returned to developers if not spent within a specific time frame.

Some responses, however, expressed the view that a sunset clause is not needed, with suggestions that revenue raised from the SBSL could be used to fund other building safety issues besides cladding remediation.

Clarity on revenue target and spend

Several responses raised that there is currently a lack of clarity on the total revenue target and spend, and that an end date could not be determined until there was greater certainty around this. Some responses noted that regular reviews for the SBSL should be implemented in place of a sunset clause.

“Given the uncertain time horizon, a sunset clause/end date may not be feasible at this stage. However, it is important that the levy is only in place to deal with cladding remediation and with a commitment to remove the levy as soon as possible. A regular statutory review point would help build confidence in that commitment.” - South of Scotland Enterprise

Sunrise clause

Homes for Scotland proposed in their response that a sunrise clause should be adopted for the SBSL, with the SBSL only commencing once the housebuilding sector is strengthened and is meeting housing delivery targets, and there is further clarity and progress on the CRP. Some other responses expressed that the SBSL should not be introduced until the total cost, scope, and duration of the CRP is known.

Impacts

A concern was expressed that the implementation of a sunset clause could incentivise developers to delay the introduction of development projects until after the end date of the SBSL, causing knock-on effects to other industries and introducing market distortion.

Question 22: Do you think there should be a regular review for the Scottish Building Safety Levy?

Of those who answered this question quantitatively (37 respondents), the breakdown of views was as follows:

Developers, other housing/property stakeholders, local government organisations, and other organisations generally strongly agreed that there should be a regular review for the SBSL. Views from individual respondents were more mixed. A full breakdown of views by respondent type is set out in the below table:

Monitoring revenue target and spend

Many responses raised that regular reviews for the SBSL could be used to monitor the revenue raised and spent, to assess remediation progress and determine how much more funding may be required to be raised for the CRP. It was noted by respondents that this would ensure there is not an overaccumulation or a shortfall in the revenue needed for remediation.

Evaluating effectiveness of levy

Several responses expressed that reviews would be a way to evaluate how the SBSL is working, and to capture and account for any unanticipated issues, economic or industry changes, and impacts of the SBSL.

“The construction sector and the impacts that affect and shape it are constantly changing, from economic shocks to changing policy objectives. As such a regular review would be useful to ensure that the Levy continues to operate effectively.” - Royal Institution of Chartered Surveyors

Changes to rates

Some developer respondents highlighted a concern that reviews could be used to increase rates of the SBSL, and that this could have a significant impact on viability of developments, particularly ongoing projects where an increase in cost has not been accounted for. It was noted that if reviews found an increase in rates was necessary, that this should be subject to further consultation and appropriate notice periods.

“Legislation for a SBSL must prevent Ministers being able to increase the levy based on the findings of the review but should allow for Ministers to subsequently reduce the levy or set at a nil-rate. Should Ministers wish to seek to increase the rate of the levy, Ministers should re-consult in accordance with the RIAG policy cycle and Framework for Tax 2021.” - Homes for Scotland

One respondent expressed the view that the SBSL will result in fewer homes being built, and subsequently a smaller tax base, and that this should not result in further increases to tax rates as this would compound the problem.

Wider building safety issues

A few responses suggested that regular reviews could be used to monitor and account for potential wider building safety issues beyond cladding remediation, to consider the long-term purpose of the SBSL.

Other

Other comments given by singular responses included the view that reviews should capture and record impacts and costs to specific development types, the point that regular reviews would align with the UK Government’s proposals for a review every three years, and the view that there should be a mechanism for regular maintenance and amendments to all devolved taxes.

Scottish Government response

The Scottish Government welcomes the views set out in responses to these questions on operational considerations for the SBSL. In line with the approach taken for the existing devolved taxes, much of the technical detail regarding tax administration will be set out in secondary legislation or in certain cases by Revenue Scotland. The Scottish Government will work with Revenue Scotland to develop the detail, including undertaking a further programme of stakeholder engagement.

•Revenue Scotland, the tax authority for Scotland, will manage the administration of the SBSL, drawing on its extensive experience of collecting and managing other devolved taxes.

•The Scottish Government agrees with stakeholder views against active conditionality, in that the issuance of a completion certificate should not be contingent on payment of the SBSL, on the basis that this conditional link could disrupt and create delays in the housebuilding process. Instead, we propose to utilise the existing suite of enforcement mechanisms provided through the Revenue Scotland and Tax Powers Act 2014 (“the 2014 Act”) to discourage non-compliance.

•The Scottish Government intends that the owner of a completed new residential unit must be registered with Revenue Scotland, and that registered persons must submit tax returns and pay tax in such periods and in such a manner as are determined by the Scottish Ministers in regulations.

•Revenue Scotland has the power to issue penalty notices to taxpayers and their agents for non-compliant behaviours with respect to the devolved taxes. Where penalties listed in the 2014 Act apply to all devolved taxes, they will also apply to the SBSL. Where amendments are required to the 2014 Act for penalties to apply to SBSL they are set out in this Bill. The framework for the collection, administration and payment of penalties provided by the 2014 Act will apply to all SBSL penalties.

•The Bill modifies the 2014 Act to extend the list of decisions made by Revenue Scotland for which review by Revenue Scotland can be requested or an appeal made to the Scottish Tribunals.

•The Bill does not contain a provision for a sunset clause for the SBSL. As raised by some consultation respondents, this decision reflects the risks this would pose to the financing of the CRP with remaining uncertainty around costs at this stage.

•The Bill contains a provision for Scottish Ministers to report on the operation of the SBSL, including how the proceeds from the levy have been used.

Source page 5

Part C of the consultation document focused on impacts of the tax in accordance with legislative requirements to complete a number of impact assessments in the development of the Bill. These sections invited views on impacts in relation to the following:

•Business and Regulation

•Child Rights and Wellbeing

•Environment

•Equality

•Fairer Scotland Duty

•Island Communities

Business and Regulation

Question 23: Do you have any information which could inform any final Business and Regulatory Impact Assessment (BRIA) relating to the Bill?

Half of the responses to this question stated that they did not have any information to inform the BRIA.

Housing delivery and cumulative impacts

Some responses expressed the view that the SBSL will have an impact on the development, viability, and delivery of housing. Some also highlighted that the impact of the SBSL on housing must be considered within a wider context of cumulative policy impacts and regulatory burdens on the industry, and that the BRIA should take these broader impacts into account.

Opportunities for further data, engagement, and assessment

Some responses highlighted opportunities for further engagement and evidence gathering as part of the BRIA process, including:

•Further direct engagement with housebuilders

•Further engagement with representative bodies of the housing industry

•Engagement with the Federation of Small Businesses

•Reviews following the introduction of the SBSL

•Review of the South of Scotland Regional Economic Partnership Housing Action Plan

Homes for Scotland, in their response, highlighted the need for further data to inform and improve the decision-making process, including an analysis of the taxpayer profile and modelling to assess the impact of the SBSL on marginal developments. Their response noted Homes for Scotland’s intention to support Scottish Government in gathering this data.

Wider impacts

It was noted that there may be wider impacts to recognise beyond those on the housebuilding sector, with one respondent highlighting that any increased burden to local authorities should be resourced, and another raising a concern about the capacity of the construction industry and wider technical experts to deliver the remediation programme.

Child Rights and Wellbeing

Question 24: Are you aware of any examples of particular current or future impacts, positive or negative, on young people, (children, pupils, and young adults up to the age of 26) of any aspect of the proposals in this consultation?

Housing delivery

Several responses expressed the view that the SBSL would have a negative impact on housing delivery, which would subsequently negatively impact young people and families. It was noted that constraints on housing delivery would make it more difficult for young people to buy their first home and would further the issue of young people and families in temporary accommodation. The wider benefits of housing delivery to children and young people were also highlighted, noting the connection between quality housing and health, and the provision of community facilities (including schools) supported by developer contributions.

“...each year the delivery of new homes in Scotland provides £179m of developer contributions to support schools, healthcare, public open space, transport and sport, leisure and community facilities. The sector's impact on education – directly via training and developer contributions and indirectly via the proven relationship between housing standards and educational outcomes – is substantial.” - Homes for Scotland

House prices

Several responses expressed the view that the cost of the SBSL will be passed on to house purchasers through increased prices, and that this would have a disproportionate impact, with respondents highlighting younger people as first-time buyers, families seeking to buy bigger homes, and the issue of child poverty. It was also noted that the SBSL may lead to increased rents in the Build to Rent sector, which may have a disproportionate impact on younger people.

Building safety

A few respondents noted the positive impact of the SBSL raising revenue to tackle the problem of unsafe cladding, an issue which has affected children, young people, and families.

Environment

Question 25: Are you aware of any examples of potential impacts, either positive or negative, that you consider any of the proposals in this consultation may have on the environment?

Almost half of responses to this question stated that they were not aware of any examples of these potential impacts.

Investment in energy efficient homes and infrastructure

Some responses raised that the additional cost of the SBSL may impact developers’ ability to invest in and delivery energy efficient homes and infrastructure.

“Through improved energy efficiency, recycling of construction waste and creation of green space – together with a reduction in car dependency via green transport links and creation of '20 minute neighbourhoods', the housebuilding sector is rightly credited with making a considerable and increasing contribution to Scotland's battle against climate change. These positive outcomes must not be inhibited by regulation making the delivery of new homes unviable.” - Homes for Scotland

Brownfield and re-use

Some responses highlighted that the SBSL could discourage development on brownfield land or conversions and re-use of existing and historic buildings. These respondents noted that there is a positive environmental impact to these projects and that a reduced rate or exemption would serve to incentivise their development.

Replacement of unsafe cladding

Respondents queried the intention for the disposal of unsafe cladding, the environmental impact of the replacement materials, and the impact on surrounding biodiversity of carrying out the remediation work.

One respondent noted the positive impact of funding the removal of unsafe cladding which exacerbates the risk of fire, which subsequently has negative environmental impacts.

Equality

Question 26: Are you aware of any examples of how the proposals in this consultation may impact, either positively or negatively, on those with protected characteristics (age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex and sexual orientation)?

Almost half of responses to this question stated that they were not aware of any examples of these potential impacts.

Housing delivery

Some responses expressed that a reduction in housebuilding resulting from the SBSL would have a disproportionate impact on those with protected characteristics – it was noted for example that these groups may face higher levels of housing insecurity and lower incomes. One respondent raised that SMEs deliver significant quantities of housing adapted to the needs of specific groups, and that this would be reduced if SMEs were to be liable for the SBSL.

House prices

Some responses expressed the view that the cost of the SBSL will be passed on to house purchasers through increased prices, and that this would have a disproportionate impact on those with protected characteristics.

Accessible homes

Respondents noted that the SBSL may discourage developers from building accessible homes which would negatively impact those with disabilities.

Building safety

It was raised that those with protected characteristics may be disproportionately affected by unsafe cladding, therefore could benefit from improved building safety and adequate funding for cladding remediation.

Fairer Scotland Duty

Question 27: Are you aware of any examples of potential impacts, either positive or negative that you consider any of the proposals in this consultation may have on groups or areas at socio-economic disadvantage (such as income, low wealth or area deprivation)?

Housing delivery

Similarly for other questions, some responses expressed that a reduction in housebuilding resulting from the SBSL would have a disproportionate impact on those at socio-economic disadvantage.

House prices

Relatedly, responses expressed that the SBSL would result in increased house prices which would have a similarly disproportionate impact on those at socio-economic disadvantage.

Lower value and high deprivation areas

A few responses noted that the SBSL could have disproportionate impacts on rural areas (where market values and average incomes may be lower, and construction costs may be higher) and on areas of high deprivation. It was raised that the problem of unsafe cladding largely affects urban areas, therefore these lower value rural areas and areas with high deprivation would be contributing towards a tax which would not directly benefit them.

Wider economy and community

Responses emphasised the benefits of new housebuilding to the wider economy and community, including improved outcomes for health, education, and community regeneration; developer contributions to community facilities and infrastructure; and the creation of employment opportunities not only in housebuilding but in related sectors supported by the housebuilding industry.

Affordable housing

It was raised that it is important to exclude all affordable housing from the SBSL in order to mitigate impacts on those at socio-economic disadvantage. It was also expressed that the SBSL may generate knock-on impacts to the cost of affordable housing.

Island Communities

Question 28: Are you aware of any examples of how the proposals in this consultation might impact, positively or negatively, on island communities in a way that is different from the impact on mainland areas?

Existing housing pressures

Several responses expressed that island communities (alongside rural areas) face existing pressures on housing that would be exacerbated by the SBSL and create disproportionate impacts for these areas. It was raised that there are high construction costs associated with building on islands, and therefore existing housing shortages which could be worsened by adding the additional cost of the SBSL onto residential development in these areas.

“...the levy being applied to island communities will disproportionally add to the cost of delivery which is already under significant pressure as it is impacting on total numbers being built on our islands. Adding additional costs through the levy would run counter to other initiatives being taken forward by the Government such as the Islands National Plan and work to boost population in areas suffering from depopulation...” - Argyll and Bute Council

Buildings affected by unsafe cladding

A few responses noted that the buildings requiring remediation of unsafe cladding are likely to be predominantly located in urban areas and cities, rather than in island or rural areas. It was therefore raised that island communities would be facing an additional cost burden to contribute towards a tax that their areas would not benefit from.

Impacts on SMEs

Some responses raised that SMEs deliver the majority of housing in rural and remote areas, and that if these developers were to be liable for the SBSL, the additional cost would have a significant impact on the viability of their businesses and development sites, thus generating further impact on the availability of housing in rural and remote communities.

Scottish Government response

The Scottish Government is grateful to respondents for their input on these questions around impacts. The information provided has been factored into the Impact Assessments which have been produced for the Building Safety Levy (Scotland) Bill, and published on the Scottish Government website.

Source page 6

•1. A & J Stephen Builders

•2. A & J Stephen Ltd

•3. Angus Council

•4. Argyll and Bute Council

•5. AS Homes (Scotland) Ltd

•6. Bancon Homes

•7. Barratt Redrow PLC

•8. BEFS (Built Environment Forum Scotland)

•9. Bellway Homes

•10. Cala Group Ltd

•11. Campion Homes Ltd

•12. Common Weal

•13. Convention of Scottish Local Authorities

•14. Cruden Group

•15. D J Laing Homes Ltd

•16. Dawn Homes (Springfield Group)

•17. Dougall Baillie Associates

•18. Dulicht Homes

•19. Dumfries and Galloway Council

•20. George Buchanan Architects Ltd

•21. Glenesk Homes

•22. Guild Homes

•23. Headon Developments

•24. Hilti Great Britain Ltd

•25. Homes for Scotland

•26. ICAS (Institute of Chartered Accountants of Scotland)

•27. Invertay Homes Ltd

•28. Invertay Homes

•29. J. Smart & Co.

•30. Keepmoat Homes Ltd

•31. Kirkwood Homes

•32. Law Society of Scotland

•33. Local Authority Building Standards Scotland (LABSS)

•34. Lovell Partnerships

•35. Mactaggart & Mickel (Springfield Group)

•36. McTaggart Construction Limited

•37. Miller Developments

•38. Miller Homes

•39. National Fire Chiefs Council

•40. Ogilvie Homes Ltd

•41. Orkney Islands Council

•42. Place for People Developments Ltd

•43. Places For People Developments Ltd/Places for People (responses combined for analysis)

•44. Propertymark

•45. R Clouston Ltd

•46. RDK Construction Ltd/RobertRyan Homes

•47. RIAS Professional Practice Committee Member

•48. Royal Institution of Chartered Surveyors

•49. Scottish Borders Council

•50. Scottish Building Federation

•51. Scottish Federation of Housing Associations

•52. Scottish Property Federation

•53. South of Scotland Enterprise

•54. Springfield Group

•55. Springfield Partnerships/Springfield Properties PLC (responses combined for analysis)

•56. Stirling Council

•57. Summix Capital Ltd

•58. Swan Group

•59. Taylor Wimpey UK Ltd

•60. The National Trust for Scotland

•61. The Royal Incorporation of Architects in Scotland

•62. Tulloch Homes Ltd (Springfield Group)

•63. Vellow Wood Architects

•64. W S Dunsire & Sons Ltd

•65. Walker Group (Springfield Group)

•66. Westpoint Homes

•67. Whiteburn Projects Ltd

Source page 7

Session 1 – Official-led meeting on scope and calculation

External attendees:

•Homes for Scotland

•Chartered Institute of Taxation

•Law Society of Scotland

•Campion Homes

•Westpoint Homes

•Robertson Homes

•DJ Laing

•Ogilvie Homes

•Keepmoat Homes

Purpose/Topic:

Session on the scope and calculation of the SBSL. This included consideration of:

•how to define the taxpayer

•the types of accommodation in scope

•how the SBSL could be calculated

•run time and sunsetting

Session 2 – Official-led meeting on scope and calculation

External attendees:

•Homes for Scotland

•Institute of Chartered Accountants of Scotland

•Law Society of Scotland

•Chartered Institute of Taxation

•North Ayrshire Council (Local Authority Building Standards Scotland)

•National House Building Council

•Charlotte Street Partners

•Guild Homes

•Cruden Group

•Springfield Group

•Whiteburn Projects

•CCG (Scotland)

•Dundas

•Persimmon Homes

•Campion Homes

•Places for People

Purpose/Topic:

Session on the scope and calculation of the SBSL. This included consideration of:

•how to define the taxpayer

•the types of accommodation in scope

•how the SBSL could be calculated

•run time and sunsetting

Session 3 – Ministerial Roundtable

External attendees:

•Homes for Scotland

•Scottish Property Federation

•Taylor Wimpey

•Bellway Homes

•Barratt Homes

•Miller Homes

•Lovell Homes

•Robertson Homes

•Westpoint Homes

•Persimmon Homes

•Avant Homes

•Springfield Group

•Cruden Group

•Keepmoat Homes

•A&J Stephen

•Campion Homes

•Whiteburn Projects

•Moda Living

Purpose/Topic:

Opportunity for stakeholders to express views directly to the Cabinet Secretary for Finance and Local Government and the Minister for Public Finance.

Session 4 – Official-led meeting on SME developers

External attendees:

•Homes for Scotland

•Scottish Property Federation

•Chartered Institute of Taxation

•North Ayrshire Council (Local Authority Building Standards Scotland)

•Bancon Homes

•Campion Homes

•Westpoint Homes

•Whiteburn Projects

•DJ Laing

•Pat Munro (Alness)

•A&J Stephen

•A S Homes Scotland

•Dundas

•Headon Developments

Purpose/Topic:

Session on SME developers. This included consideration of:

•How to define SME for the purposes of the SBSL

•How SMEs may be disproportionately impacted compared to larger organisations

•How impacts may be addressed

Source page 8

1 Includes local authorities, Local Authority Building Standards Scotland (LABSS), and the Convention of Scottish Local Authorities (COSLA)

2 Annex F – Glossary of definitions - National Planning Framework 4 - gov.scot