Building Safety Levy Expert Advisory Group minutes: May 2024

Attendees and apologies

• Colin MacBean, Scottish Government
• Fionna Kell, Homes for Scotland
• John Stephen, A&J Stephen
• Ben Emmonds, Taylor Wimpey
• Justine Riccomini, Institute of Chartered Accountants of Scotland
• Christopher Thorpe, Chartered Institute of Taxation
• Isobell d’Inverno, Law Society Scotland
• David Melhuish, Scottish Property Federation
• Scott McKenzie, Local Authority Building Standards Scotland
• Scottish Government officials 
• Revenue Scotland officials 

Items and actions

Welcome and introductions 

Colin MacBean (CM) welcomed the group and led a round of introductions.  

Agreement of Terms of Reference 

CM invited comments on the draft Terms of Reference (ToR).   

It was noted that group meetings would be minuted and the minutes published.  

A number of financial points were noted:  

• there is currently no published costing of the Scottish Government’s (SG) Cladding Remediation Programme (CRP), or a schedule of when spending will increase in line with an increase in active remediation 
• this impedes the ability of representatives of the residential property development sector to contribute fully to policy development  
• the figures for the flow of revenue from the Residential Property Developer Tax (RPDT) to remediation in Scotland should be added to the draft ToR for the group 

A question was raised about the scope of the power devolved, and it was agreed that some detail on this should be added to the ToR for the group.  

It was noted that Ministers are looking to understand the concerns of the industry as well as the concerns of those living in impacted buildings.  

It was noted that while ideally we would have data on the costs of the CRP, there is significant lead-in time for development and implementation of a tax. In order to give appropriate time for stakeholder consultation starting early has advantages over waiting. 

Homes for Scotland noted that they hold a fundamental concern on the principle of a Building Safety Levy being introduced in Scotland.  

Policy paper: Building Safety Levy principles 

Scope and liability  

SG officials introduced the relevant section of the paper, and the following points were raised:  

• there is a need for balance between protecting Small and Medium Enterprises (SMEs) (for which the 10 unit limit was suggested to be low) and ensuring that the whole burden does not fall entirely on larger developers 
• the Scottish planning system has a limit of 50 units for a small development, which could be seen as a more natural choice 
• there is a possibility of buildings that are being repurposed exceeding the 10 unit threshold easily 

The taxpayer  

SG officials introduced the relevant section of the paper, and the following points were raised:  

• a question about whether the tax would fall only on those operating in the residential property sector was raised, and it was clarified that the power devolved to Scotland will be ‘equivalent’ to that taken by the UK Government - the UK Levy applies only to new residential buildings 
• a question about the definition of the term ‘client’ and it was clarified that this applies only in the UK legislation and that we will not be bound to it in Scotland 
• there is a distinction in the developer remediation contracts between contractors and developers, and it was noted that any prospective legislation for the building safety levy should be consistent with this distinction also  
• it was clarified that the question on taxpayer is looking to define a single taxpayer for the prospective building safety levy and to ensure that there is no inadvertent definition of more than one taxpayer per development 
• one member noted that a broader tax base would be preferred by the organisation they were representing 

Taxable event  

SG officials introduced the relevant section of the paper, and the following points were raised: 

• representatives from the residential property development sector noted that a single payment point later in the day (for example at application for/ issuance of a completion certificate) would be preferable - this was for reasons of cash flow, as well as because it is not uncommon to apply for building warrants and never complete the relevant development which would lead to payment of tax on unfinished developments 
• it was also noted that a conditional tie between payment of tax and issuance of a completion certificate would support compliance, but the long list of checks at the point of issuance of a completion certificate may make the addition of payment of tax burdensome 
• split payment (as in the proposed English Levy model) is not favoured - a single point of payment would have less of an admin burden for all involved 
• representatives from the residential property development sector clarified that completion certificates are generally applied for on a plot-by-plot basis, rather than once the whole plot is completed - this is because there may be a long time lag between the first plot on a development being completed and the last 
• the view of the group was that a process by which returns were submitted monthly or quarterly would work, but that if they were to be plot by plot this would not create huge difficulties - an e-portal exists that could facilitate real time processing  
• it was highlighted that the general expectation may be that this will be a local tax (as the UK levy is being administered locally, although it is a national tax), and that this should be clarified from the outset 
• a question was raised about synchronizing returns with planning levies, which are paid six months in arrears 

Basis and calculation  

SG officials introduced the relevant section of the paper, and the following points were raised: 

• the group preferred sale price as a means of calculation, as anything else may create significant unintended consequences 
• where properties are not sold, such as purpose-built buy-to-rent properties, professional surveyors produce a valuation report which could be used 
• a further proposal was to use the Building Costs Indexes System as a guide as this takes account the cost of a development regardless of whether it is being sold or rented - it was noted that this system represents the cost of the development to construct rather than the value of the properties constructed 
• the point was made that rates must be clear from the outset, and that if there is to be geographical variation there must be national consistency in preparation and timing for any rate changes 
• the point was raised that consideration should be given to active incentivization of building on brownfield sites, and that policy development on this should be consistent with wider Scottish Government policies (particularly National Planning Framework 4) 
• the point was raised that consideration should be given the options available to Ministers should it become clear that there is a significant impact on the number of homes (private or affordable) being built in Scotland as a result of the levy or the current rates 
• a point was raised on cumulative impacts, with requirements for Electric Vehicle (EV) chargers and new heat in buildings standards presenting additional costs to developers - this can cause impacts where viability is marginal 

Any other business 

The scope of the levy was discussed, including the intended run time of the measure. It was clarified that the UK Levy has no sunset clause, but that there are no restrictions placed on the devolved legislation in this regard. Members were encouraged to engage with Scottish Government on this point to help inform Ministers decisions.  

The possibility of addressing a portion of the cladding remediation costs through an increase in Land and Buildings Transaction Tax (LBTT) or Scottish Landfill Tax was raised as this would reduce the burden on the development sector relative to the proposed Scottish Levy.  

The question was raised about use of funds, and the potential for ‘mission creep’ was raised in scenarios where additional issues with buildings are revealed by the removal of cladding.  

Actions:  

• members of the expert advisory group are invited to submit written responses on any aspect of the discussion before 24 May 2024 
• the group secretariat will update the draft terms of reference and circulate in advance of the next meeting 
• the group secretariat will invite a member of the More Homes team within Scottish Government to attend the next meeting 
• Cladding officials will circulate indicative timings for the completion of the costing exercise for the Cladding Remediation Programme when this information is available