Proposed Building Safety Levy: Scotland v England – Key Points

PROPOSED BUILDING SAFETY LEVY SCOTLAND

PROPOSED BUILDING SAFETY LEVY ENGLAND

Effective date

Subject to primary legislation and secondary legislation (regulations) being passed, the levy is intended to come into effect on 1 April 2027.

Originally intended to come into effect in autumn 2025, but subject to secondary legislation being passed, it is now intended for autumn 2026.

The scope

Any “new residential unit”, which on the building completion date is intended to be used as a dwelling or other accommodation in Scotland.

It is proposed that, in addition to new homes, new residential units expressly include student further or higher education flats and halls of residences; and residential accommodation built for the purpose of occupation by tenants.

The Bill does not set out any exclusion for largely complete development sites, nor for dwellings for which building warrants had been obtained prior to a certain date.

All new dwellings containing 10 or more units, including purpose-built student accommodation which require certain building control approvals in England.

Liable to pay

The "owner”; identified at the time of application for the practical completion certificate.

For a typical new build plot sale, the owner would be the developer.

For a sale comprising a land sale with an associated construction contract or development, the owner would be likely to be the end user (i.e. the purchaser), rather than the developer. 

The Bill allows for two or more bodies corporate to be treated as members of a group. While each group would require to have a representative member, each member of the group is jointly liable to pay the levy. 

The “Client”; as defined within the Building Regulations 2010, meaning any person or organisation for whom a construction project is carried out, including as part of their business, would be responsible for paying, or ensuring payment of, the levy.

If the Client changes with levy payments outstanding, then the new Client would take on responsibility for such payments.

There is no specific group provision outlined so far. However the Client may be a company, an individual, the Principal Designer and/or the Principal Contractor.

Exemptions

“Exempt new residential units” include:

• buildings intended to be let for social housing;
  
  
• buildings funded as affordable housing, for which construction funding has been provided (under sections 1 or 2 of the Housing (Scotland) Act 1988, or section 92 of the Housing (Scotland) Act 2001);
  
  
• any building located on a Scottish island; and
  
  
• pre-existing residences, which have been subject to construction or conversion, that have not resulted in a change to the number of the parts of the building which are intended to be (or are) used as dwellings.
  
  The Bill carves out further buildings (at s.4(3) including:
  
  
• temporary residential accommodation, such as hotels;
  
  
• residential accommodation for children, those needing personal care, hospitals/hospices, prisons or accommodation for school pupils;
  
  
• accommodation provided by a registered Scottish charity body to a person employed to perform work of a minister of a religious denomination whereby employment duties are performed, or within a monastery or similar establishment; and
  
  
• accommodation provided in support of asylum-seekers and dependants.
  
  

The Bill provides for future regulations to vary the range of exempt buildings at s.6(2). The explanatory notes for the Bill highlight the potential use of this power to exclude specific remote rural locations.

Small developments of fewer than 10 units, or purpose-built student accommodation with fewer than 30 bedspaces. 

Residential community facilities and certain communal accommodation e.g. affordable housing (with social housing recognised as falling under affordable housing), care homes, NHS hospitals, supported housing and domestic abuse facilities.

Measurement basis

The floorspace area (in square metres) of the new residential unit, with details of the methodology to follow in regulations. However, we anticipate that the basis of measurement in Scotland will be similar to the approach in England. 

The qualifying residential floor space (in square metres), based on Gross Internal Area as set out in as set out in the RICS Code of Measuring Practice 6th Edition, as a widely used and recognised method of measuring floorspace.

This includes floorspace of communal areas, save for communal space which is shared between chargeable and exempt areas. For example, a lobby which gives access to exempt affordable dwellings and dwellings which are for market sale and therefore chargeable.

In this case, a proportion of the communal space equivalent to the proportion of exempt areas will be exempt from the levy charge.

Rates

Regulations will specify the rate (or rates) of the levy.

Rates may differ depending on factors such as the geographical area, types of land, or indeed any factor which the Scottish Ministers consider appropriate.

The Bill therefore provides scope for the levy to be charged on a more granular basis than the English levy (where the factors are expected to be only the local authority area and whether or not the land was Previously Developed Land). There are therefore potentially more factors to be considered in Scotland.

Once the relevant rate has been identified, the levy will be calculated by multiplying the rate by the square meterage of the floorspace of the new residential unit. 

Rates per square-metre of chargeable floorspace will vary by local authority, depending on local land values.

There will be a discount of 50% for developments built on Previously Developed Land (“PDL”) (AKA brownfield land) and where at least 75% of the land within the planning permission redline boundary qualifies as PDL.

The proposed rates vary from £6.35 / £12.70 (County Durham) to £50.17 / £100.35 (Kensington and Chelsea) for PDL / non-previously developed land.

Trigger point for liability

At the “building control event”, meaning taxation on the earlier of:

• the acceptance of a completion certificate (s18 Building (Scotland) Act 2003); and
  
  
• the grant of permission for temporary occupation (s21(3) of the 2003 Act)

The levy should be paid prior to the client applying for the first completion or final certificate for the works under the application or notice.

Reliefs and levy-free allowance

Reliefs:

The Bill authorises the Scottish Government to provide for reliefs from the levy, by future regulations. No details for the reliefs are provided in the Bill, but the explanatory notes suggest that one target for relief could be rural developments.

Levy-free allowance:

The Bill allows for the Scottish Government to provide for a levy-free allowance, by future regulations.

The regulations can provide for the number of units that would be levy free, different numbers of units for different purposes, or periods, exclusions and also arrangements within groups of companies.

We understand that the arrangements for levy-free units are likely to be the basis for any arrangements intended to assist small and medium enterprises (“SMEs”).

As well as exclusions noted above there may be other measures, noting that the UK Government says it is “keen to put supportive measures in place for SMEs”. 

Administration and payment

Administration will be via Revenue Scotland, requiring self-assessment and registration with Revenue Scotland for return.

Any owner of a new residential unit at the time of a “registrable event” (the application for the practical completion certificate or permission for temporary occupation) is obliged to register with Revenue Scotland on the Scottish building safety levy register.

In relation to the timing of payment of the levy, the Bill provides for the Scottish Ministers to pass regulations setting out accounting periods for the levy, for submitting returns and for payment of the levy.

The explanatory notes to the Bill set out examples based on quarterly returns, although the actual regulations may use a different period.

The Bill does therefore suggest that the levy would be payable after the applications for a completion certificate etc, and so would be likely to be better aligned to the cash flow of developers, than the English levy.

However, the consequence of this is that the Bill does give Revenue Scotland rights to require security for payment of the levy.

Administration and collection will be via local authorities on behalf of central government, as part of the building control process.

The Building Regulations 2010 and the Building (Higher-Risk Buildings Procedures) (England) Regulations 2023 will be amended to provide for the provision of the necessary information (to allow the collecting authority to calculate the levy), to be provided as part of the documentation submitted at various stages of the building control process. The amount of the levy would then be known at an early stage of the process.

Penalties

It is proposed the Revenue Scotland and Tax Powers Act 2014 is amended, to apply penalties e.g. for failures to make a tax return by the statutory deadline to the levy and to pay the levy.

These penalties are suggested to be financial, ranging from a sliding scale of set amounts for the amount of penalty for failures to pay, to a percentage of the potential lose revenue for failure to register etc.

- Withholding of a building control completion certificate.
- Rejection of a final certificate.

The UK Government notes as completion certificates are a legal requirement for buildings over 18 metres in height and are required by many mortgage lenders, without a certificate developers are likely to struggle with selling and occupying the building if the levy is not paid.

It is not clear whether there will be any financial penalties for non-payment of the levy.