Aiming to reject complacency in the wake of the Grenfell Tower Inquiry, the Scottish Government opened its consultations for a Scottish Building Safety Levy (SBSL) on 23 September 2024. The SBSL would take the form of an additional charge on housebuilders for new residential developments. This is to ensure the financial burden is not the direct responsibility of homeowners or general taxpayers. Revenue from this would support Scottish Government work to remediate cladding in existing residential buildings, 11 metres and over in height, constructed or refurbished between 1 June 1992 and 1 June 2022.

Those with an interest in the sector are invited to share their views, starting with whether this method is a fair way to finance cladding remediation. Referring to the Scottish Government's commitment to deliver 110,000 affordable homes by 2032, should this scheme be removed from the SBSL to avoid impact? Should we then consider removing smaller developers? If so, it must then be agreed how to classify this category. The consultation asks for other potential exclusions to be suggested to render the SBSL as fair as possible.

It is suggested that the SBSL should be calculated as a proportion of the market value of the property. However, alternative methods of calculation must be considered for properties sold by other means. The consultation also suggests a different rate for brownfield developments (those that have been previously developed), to support sustainable reuse.

The consultation then moves to operational considerations; it is anticipated that the taxable event which will trigger liability for the SBSL will lie within the building standards process, as this is a well-established requirement for housebuilders. The Scottish Government suggest that the tax point for the SBSL should arise when acceptance of a completion certificate is issued for relevant new construction work. Since this is at the end of the building process, as opposed to any alternative tax point in the building warrant process, they suggest that it will not only capture any design changes but will also mitigate cash flow concerns for homebuilders. The consultation asks for approval of Revenue Scotland as the relevant agency for collecting the SBSL on a self-assessed basis through tax returns, posing questions such as; how often should those returns be, should that relevant authority have investigatory and enforcement powers, and should there be additional sanctions for taxpayers harbouring persistent or major non-compliance? To resolve these acts of non-compliance, dispute resolution would be used to remain consistent with other devolved taxes. Finally, the Scottish Government seek views on a sunset clause or end date to the SBSL. Introducing one could risk that the revenue stream may conclude prior to completion of remediation works. Therefore, regular review of the necessity of the levy as an alternative is also suggested.

The Scottish Government request opinions regarding the increased burdens homebuilders may have for assessing liability, submitting returns and paying tax on their relevant developments. They also welcome input regarding impact on young people, the environment and concerns for equality.

The consultation closes on 18 November 2024. Though the SBSL will not be introduced before April 2026, it is important that those with an interest in the sector share their views at this stage. This will assist in understanding the potential impact the SBSL may have.

If you wish to discuss the SBSL in further detail, please get in touch with Brian Hutcheson.

We appreciate the contribution of Rachel Smith in drafting this article.