Building Safety Levy (Scotland) Bill: business and regulatory impact assessment

Introduction

Scottish Building Safety Levy

This Business and Regulatory Impact Assessment (BRIA) accompanies the Building Safety Levy (Scotland) Bill 2025 (‘the Bill’) and is a development of a partial BRIA published in September 2024^[1]. This document is written subject to the best available information at the time, based on evidence gathered from engagement with relevant stakeholders.

This BRIA is structured into the following sections:

• Introduction
• Executive Summary
• Section 1 – Background, aims and options
• Section 2 – Engagement and information gathering
• Section 3 – Costs, impacts and benefits
• Section 4 – Additional implementation considerations
• Section 5 – Next steps and implementation

Additional supporting analysis is linked to within footnotes and is referred to throughout this BRIA.

1. Executive summary

1.1 Issue and why it needs to be addressed

The UK Government’s decision to introduce a Building Safety Levy in England-only means that the Scottish Government will receive no consequential funding from its introduction. This creates a funding gap and a disparity in the powers available to the Scottish Government to tackle the issue of unsafe cladding.

The Scottish Building Safety Levy (SBSL) seeks to obtain a contribution towards the cost of cladding remediation from the housebuilding industry as a whole, ensuring the cost does not fall directly onto affected homeowners or disproportionately onto the general taxpayer.

The Scottish Government’s Cladding Directorate have produced initial, indicative capital costs estimates that to reduce the risks associated with unsafe external wall cladding systems in Scotland could require Scottish Government led capital funding in the range of £1.7 billion to £3.1 billion over a potential 15-year programme of works.

The Levy will provide vital revenues to support the funding of the Scottish Government’s Cladding Remediation Programme.

1.2 Intended outcomes

The Bill establishes a revenue raising measure intended to generate funds to support the Scottish Government’s Cladding Remediation Programme. The policy intention is equivalent to that of the UK Government’s England-only Building Safety Levy.

1.3 Options

Option 1 – Do nothing.

Option 2 – Change existing devolved taxes

Option 3 – Introduce a Scottish Building Safety Levy to support the funding of the Cladding Remediation Programme

1.4 Sectors affected

The Scottish residential construction and real estate sector

Wider housing market

Public authorities - Local authorities, Revenue Scotland, Scottish Government

1.5 Engagement completed, ongoing and planned

Internal engagement ongoing.

External engagement is ongoing through an Expert Advisory Group.

A public consultation on the SBSL was open from 23 September to 18 November 2024. Alongside this, roundtable events were organised, including one Ministerial led session. Each roundtable focussed on different key stakeholder groups, including: developers and representative bodies in the Scottish housebuilding sector; tax and legal professional bodies; as well as Local Government representative bodies.

Several follow-up engagement sessions were undertaken with Local Authorities as well as Enterprise Agencies. A fuller list of these engagements can be found in Section 2: Engagement and information gathering.

As part of evidence gathering for this BRIA further engagement was taken with industry stakeholders in the form of an impacts questionnaire. The questionnaire was intended to gain evidence of any potential impacts on businesses affected by the introduction of a SBSL. The questionnaire was structured around three main areas: Financial and Administrative Impacts; Cumulative Regulatory Impacts; and Wider Impacts, Land and Housing. 18 responses were received with the evidence outlined further below under Section 3: Costs, Impacts, and Benefits.

1.6 Anticipated impacts (intended and unintended, positive and negative) and mitigating actions

Positive impacts – increased revenue to support the Cladding Remediation Programme and the associated works to remediate buildings fitted with unsafe cladding. This provides individuals living in affected properties the additional certainty that their properties will be remediated and that the costs for the works will not fall directly to them. This also ensures that the costs do not fall disproportionately onto the general taxpayer.

Negative impacts – additional costs for residential property developers (which is explored in more detail in Section 3: Costs, Impacts, and Benefits).

1.7 Enforcement/compliance

Revenue Scotland will be responsible for the collection and management of the SBSL. Revenue Scotland's compliance and enforcement powers are broadly in line with those used to administer existing self-assessed devolved taxes, such as Land and Buildings Transaction Tax.

1.8 Recommendations/implementation plans

Scottish Government and Revenue Scotland will continue to work with the housebuilding industry throughout the legislative process and implementation of the tax to ensure impacts are appropriately identified, minimised and where possible mitigated.

The Scottish Government and the Ministry for Housing, Communities, and Local Government will work together to monitor and evaluate the potential economic impacts of all Building Safety Levies in the years ahead.

Scottish Government will continue to work with Revenue Scotland, Local Government and Local Authority Building Standards Scotland (LABSS) to identify, minimise and mitigate potential impacts on the local authority building standards processes.

1.9 Evaluation and monitoring of implementation/review of BRIA

As a novel tax, the Scottish Government is committed to reviewing the performance of the SBSL in relation to its objectives once it is in operation. The Bill contains a provision for Scottish Ministers to report on the operation of the SBSL within the Act. The reports may occur at such intervals as Ministers consider appropriate and must set out how the proceeds of the levy have been used and anything else that the Scottish Ministers consider appropriate.

This approach broadly mirrors the UK Government proposals for its Building Safety Levy, which is to be reviewed every three years but with the ability to conduct more frequent reviews should the UK Ministers decide that they are warranted. It also mirrors reporting provisions in other novel taxes, for example the reporting requirements for the Visitor Levy, as set out in section 75 of the Visitor Levy (Scotland) Act 2024^[2].

The Scottish Government’s national housing emergency is focussed on providing everyone in Scotland the right to a warm, safe and affordable home, which is essential to our key priority of eradicating child poverty. The Bill includes a provision for Ministers to regularly review and report on the performance of the SBSL, which will allow Ministers to take into account how the SBSL is contributing to the Scottish Government housing objectives, as well as its role in reducing costs that would otherwise be faced by residents and property owners impacted by unsafe cladding.

We propose the policy to be considered by the Regulatory Review Group before the commencement date of the SBSL.