On 19 April 2024, the Scottish Government announced that it had secured powers to introduce a Scottish Building Safety Levy (“SBSL”), to assist in raising the funding required to remedy unsafe cladding. 

These powers were sought following the introduction of a Building Safety Levy (“BSL”) in relation to buildings in England, under The Building Safety Act 2022.  As Holyrood does not have the power to introduce new taxes or levies without the devolution of powers from UK Parliament, the Scottish Government first had to request the transfer of powers from Westminster.

While details have not yet been released as to how the SBSL will operate (with anticipated consultation and liaison between Holyrood, Westminster and the housebuilding sector), the following is a short synopsis of what we do know at this stage, based on the rules that are anticipated to apply in England. 

Who is impacted?

The SBSL will operate as a charge on property developers in relation to the construction of new residential buildings. The revenue generated will help fund the Scottish Government’s Cladding Remediation Programme, which was created in the wake of the Grenfell Tower tragedy.

The SBSL will be in addition to the Residential Property Developer Tax (“RPDT”) which came into force on 1 April 2022, charging an additional 4% Corporation Tax on the largest residential property developers (broadly companies or groups undertaking UK residential development activities with annual profits in excess of £25m).

The Building Safety Levy – what we know about the proposed English Levy

The UK Government originally intended the BSL to target “higher risk” buildings, but the scope was extended to cover “all relevant buildings”, being buildings in England consisting of, or containing:

• one or more dwellings; or
• other accommodation (including temporary accommodation such as hotels or hospitals)

The Levy will be payable by developers irrespective of where they are based or their profit margins.

What is the Basis of Charge?

As yet, BSL rates have not been published. However, following consultation, the intention is for the BSL to be charged on a per square metre basis.

The proposal is that each local authority will have its own rate, set centrally, to reflect regional variations in land value and house prices.

Local authorities will act as the collection agency, and the BSL will fit into the building control process (with payment required before completion certificates are issued or a final certificate is accepted for a development). 

Exclusions

The UK Government has noted during consultation that it does not intend to penalise unnecessarily or prevent the development of important community facilities. As such, the proposed exclusions are:

• affordable housing;
• non-social homes built by not-for profit Registered Providers;
• NHS hospitals, NHS medical centres and NHS GP practices;  
• supported housing,
• children’s homes
• domestic abuse facilities;
• criminal justice accommodation;
• armed forces accommodation;
• care homes and nursing homes
• developments of fewer than 10 units (or 30 bedspaces in the case of purpose-built student accommodation);
• improvements to owner/occupied homes and refurbishments

It is noted that developments of build-to-rent, purpose-built student accommodation and private older people’s housing (retirement housing) are otherwise intended to be subject to the BSL.

What will the Scottish Levy look like?  

Whilst the SBSL is expected to be based on the BSL, how the SBSL will operate in practice has not yet been confirmed. There are fundamental differences in the building controls processes north and south of the border (and powers held by the respective governments) meaning that, as things currently stand, administration and enforcement of the SBSL would diverge from the BSL.

We understand the Scottish Government is considering an approach based on a “Compliance Plan”, to be submitted pre-building warrant application and then at final warrant approval stage. While these departures are clearly needed to reflect the differences in systems, it may be the case that the Scottish Government also use the regime to seek to address other policy matters.   

Other considerations

It is also worth highlighting that Wales is proceeding with its own building safety levy, that is anticipated to go beyond the BSL, and the position in Northern Ireland is still under review. Therefore, there could potentially be four different regimes operating in the UK.

We await further details and timelines at this stage. The latest consultation response from April 2024 can be found here.

Get in touch

If you have any queries on the proposed levy, please get in touch with me at stuart.thomson@jcca.co.uk.