Building Safety Levy Expert Advisory Group minutes: January 2025

Attendees and apologies

• Colin MacBean, Scottish Government Tax Directorate 

• David Raine, Homes for Scotland 

• John Stephen, A&J Stephen  

• Jonathan Sharma, Convention of Scottish Local Authorities  

• Scott McKenzie, North Ayrshire Council and representing Local Authority Building Standards Scotland

• David Melhuish, Scottish Property Federation 

• Justine Riccomini, Institute of Chartered Accountants of Scotland  

• Alisdair Clements, Inch Architecture  

• John Sinclair, Law Society of Scotland 

• Scottish Government officials 

• Revenue Scotland officials 

Items and actions

Welcome and introduction 

Colin MacBean (CM) welcomed attendees to the Expert Advisory Group (EAG) meeting and invited introductions, noting changes to membership of the group. 

Agreement of previous minutes and actions 

CM provided a summary of actions agreed from the previous meeting and progress made on these to date: 

• Scottish Government (SG) Tax Directorate to follow up with the EAG once analysis of the consultation has been carried out - it was agreed that analysis of the consultation would be discussed at the next meeting of the EAG
• SG Tax Directorate to follow up with the Scottish Property Federation to facilitate further engagement with Build to Rent (BTR) developers - it was noted that discussions have taken place with DM of the Scottish Property Federation and that engagement is ongoing
• SG Tax Directorate to meet with Homes for Scotland on the proposed exemption for affordable housing and on facilitating engagement with SMEs - it was noted that this action remains open and SG intend to meet with Homes for Scotland on these points
• SG Cladding Directorate to follow up with Homes for Scotland on work ongoing around the pilot programme and pilot cleanse and to follow up with further information on Cladding Remediation Programme (CRP) progress - it was confirmed that this action remains open, and that any relevant information arising from discussions with individual members would be fed back to the EAG. SG officials signalled their intention to give the Group a more in-depth update on CRP progress when possible

The minutes for the previous meeting were agreed by the Group.   

Agreement of revised Terms of Reference 

CM gave an overview of updates made to the Terms of Reference (ToR) for the Group. 

• legislation and timing, paragraphs 4-10: additional section inserted to reflect progress to date and future legislative plans for the development and implementation of a Scottish Building Safety Levy (SBSL)
• governance and accountability, paragraphs 11-15: update that papers will now be circulated a minimum of 5 working days prior to meetings
• timescales, frequency, and location of meetings, paragraphs 17-18: reference to the Group meeting “on three occasions; twice in advance of a public consultation and once after” has been removed to reflect the ongoing nature of the Group, with a note that meetings will now be held as required “throughout the development of the policy and legislative process”. CM noted the need to ensure that meeting schedules are not onerous but also that the Group is given sufficient opportunity to provide input on policy development
• membership, paragraphs 19-20: updated with new members and non-member attendees joining, and with those leaving the Group

It was noted that COSLA will review agendas for each meeting to determine on a flexible basis who would be best placed to attend to represent the organisation. CM agreed that SG are happy to accommodate this.  

The revised ToR was agreed by the group. 

Update on current position of work on the Scottish Building Safety Levy 

SG officials spoke to slides providing an overview of the SBSL and work progressed to date, highlighting the new phase of work on the SBSL with the necessary powers devolved, consultation closed and analysis underway, and Programme for Government commitment to introduce the Levy in Scotland. SG officials set out indicative timelines and draft policy proposals and invited questions from the Group.  

A concern was noted by some Group members regarding the use of secondary legislation, acknowledging the need for flexibility and to not tie future administrations to previous decisions, but also the need for certainty. It was expressed that if secondary legislation is to be used there would need to be backstops in place to limit how frequently these powers could be used, and that (similarly to regular reviews for the Levy), frequent changes create uncertainty for homebuilders and prevent the tax from ‘bedding in’. CM acknowledged the importance of certainty and the point on frequency of changes, noting that this should be considered as part of the Business and Regulatory Impact Assessment (BRIA). 

There was a concern noted that SG do not have a sufficient understanding of the complexities of affordable housing transactions and that the definition of the taxpayer as the landowner may create difficulty in what is captured (and not captured) by an exemption. CM noted that SG officials should follow up with More Homes colleagues to draw out the complexities of affordable housing transactions and highlighted that decisions on exemptions will ultimately be taken by Ministers. CM also noted that the parliamentary process for the Bill will include a call for evidence from Committee.  

There was a request for clarity on the language within the presentation of ‘mitigating impacts’ to small businesses, where previous language from SG was of exempting or excluding small businesses. SG officials confirmed that there has not been a change in policy intention regarding small businesses and the change in language is solely a difference in drafting.  

A question was raised on Small and Medium Enterprises (SMEs) and whether they will be liable to pay the levy. CM noted the final decisions on exemptions and how broadly these exemptions will be defined will be taken by Ministers. CM highlighted the importance of capturing impacts on SMEs in the BRIA and of understanding which impacts an exemption would be seeking to ameliorate. CM noted the importance of the Group and their commercial experience and expertise in informing advice that will be given to Ministers on these points. It was noted that boundaries for exemptions will be important, and that there is a need to capture complexities. 

A number of further points were raised, including: 

• whether there is any further understanding on the quantum of the levy in terms of how many units per year the Levy will be charged on, how long the Levy will run for, and the size of the cladding problem - SG officials noted that SG Cladding Directorate are currently working on costing, with a top down and bottom up costing models now developed that will inform not only the SBSL but wider work on cladding remediation. It was noted that the output from this work is not yet ready to be shared but will be shared in due course
• the runtime of the Levy, noting that SMEs may prefer the Levy to run for longer with a lower cost per unit, as this would reduce the impact and provide further certainty
• transitional arrangements for the Levy and when the Levy will apply, specifically whether developments will become liable when a building warrant has been obtained but not yet a completion certificate when the Levy comes into effect - CM acknowledged the need for certainty and noted these are exactly the points to be considered by the BRIA, in terms of how decisions will impact homebuilders’ ability to plan ahead. CM emphasised the importance of the EAG in surfacing these points on impacts throughout the legislative process, and the requirement to balance the need to raise revenue while minimising impacts on the sector. SG officials noted the UK Government’s (UKG) approach that transitional arrangements will be in place for developments completed after the Levy is introduced but connected to planning/building warrants applied for beforehand
• that most SMEs did not contribute to the problem but are being asked to pay, unlike for example hotels, which are exempt. A point on bungalows from a previous meeting was reiterated, that an exemption for these developments would positively impact on the SME sector (who predominantly provide these developments, often in rural areas with acute housing shortages) and would also meet a social need - CM noted this point and stated SG would take this away to consider
• the difficulty of engaging with the policy development and work around impacts of the Levy without knowing more information on who is going to be liable to pay, and what the standard, scope, scale, and cost of the remediation work is going to be - SG officials noted that the consultation paper on the SBSL stated that the Levy would be set at a rate intending to raise £30 million per annum 
• the tightness of the timeline for the Bill and the importance of the Group having opportunities to input into the policy and being able to work iteratively before decisions become embedded - CM acknowledged the importance of iteration and recognised the constraints of the parliamentary timeline. SG officials agreed with this point on iterative working and noted it would be beneficial to discuss the consultation analysis with the Group at the next meeting in advance of publication
• members asked for further clarity on the revenue target for the Levy and how this figure fits into other funding strands for cladding remediation, with a view expressed that it is unreasonable to be pressing ahead with work on the Levy when the scope and cost of the remediation programme and detail of the tax remains unknown, highlighting that this makes it difficult for businesses to engage with the BRIA and to understand potential impacts - CM noted there is uncertainty around the figures but expressed his understanding that the £30 million will not entirely meet the expected funding gap, and that there will still be a cost to the public purse even with this revenue alongside Barnett consequential funding. CM acknowledged this uncertainty on the total cost and the inability to map out exactly how long the Levy will be required and the precise total cost to be met and reiterated the importance of the Group providing information on sensitivities and impacts. It was raised that the quantum (and therefore the impact) of the Levy would be reduced if the homebuilding sector was strengthened and meeting its targets for housing delivery. CM responded that ways to grow and strengthen the tax base was a key consideration

Discussion on Business and Regulatory Impact Assessment 

SG officials summarised the process and purpose of carrying out a Business and Regulatory Impact Assessment (BRIA): to assess costs, benefits, and risks of legislation to the sector and to regulators; to improve and support decision making; and to ensure stakeholders are informed on policies which may impact them.  

SG officials noted earlier publication of the partial BRIA which provided an initial assessment and was informed through contributions from the Group. SG officials invited views from the Group on the draft questionnaire for the BRIA (as shared prior to the meeting) and noted SG are looking for help from the Group to design the questions and disseminate the questionnaire in a way which will gather evidence most effectively on impacts.  

There was a query on what supporting information SG will provide alongside the BRIA, noting the ability to model and estimate impacts on overall viability across Scotland is difficult. It was noted that unlike England, Scotland does not have a valuation office agency to provide a national scale of valuation information and modelling. CM noted the importance of clarity on what evidence would be most helpful to gather and provide to support answering these questions on impacts. It was noted that there is work underway on analytical modelling and wider work on cumulative impacts and the sequencing of introductions of new policy though it was raised this work may be limited in scope. CM noted intention to follow up on this wider modelling work. 

It was expressed that a priority order must be determined for new proposed policies to avoid a substantial impact on housing delivery through cumulative costs.  

On the question of wider impacts on land and housing stock in the BRIA, the importance of recognising high value and low value areas even within the same local authority was raised. This point was also acknowledged in reference to the tax calculation method and that a market value calculation would capture these differences. 

It was asked if there will be indicative figures published alongside the BRIA to aid understanding. SG officials noted there will be a brief overview of indicative policy design but there will not necessarily be figures on the quantum of the tax, though SG will take these points away to determine what information will be most useful to provide for clarity. SG officials noted that certain pieces of information have been published across different documents, with the BRIA providing an opportunity for these figures to be presented together.  

It was noted that costs from the Levy could be passed on through higher rents for BTR and PBSA developments in addition to through higher house prices for purchasers and suggested that the questions in the BRIA could reflect this difference.  

SG officials noted intention to send a follow-up email to the Group requesting further comments and input on the BRIA questionnaire via correspondence.  

Action points 

• consultation analysis to be shared and discussed with the Group at the next meeting
• SG Tax Directorate to follow up with Homes for Scotland on open actions from previous meeting, on affordable housing transactions and on facilitating engagement with SMEs
• SG Cladding Directorate to follow up with Homes for Scotland on open action from previous meeting on CRP progress and to bring any updates arising from this back to the Group if necessary
• SG Cladding Directorate to follow up on open action from previous meeting on information on remediation progress and indication of programme costs, and to bring any updates arising from this back to the Group if necessary
• CM to discuss further work on modelling cumulative impacts with Homes for Scotland and More Homes Division
• SG officials to invite further comments from the Group on the BRIA questionnaire via written correspondence