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

Section 2: Engagement and information gathering

3. Engagement

3.1 Approach to Engagement

Consistent with the Framework for Tax and in the spirit of the New Deal for Business, the Scottish Government has engaged with stakeholders to inform the development of the Bill. The Scottish Government conducted a public consultation on proposals for the SBSL from 23 September to 18 November 2024. A total of 78 responses were received, which were analysed by officials from the Scottish Government. The public consultation was accompanied by a partial Business and Regulatory Impact Assessment (BRIA) which set out an overview of the costs, benefits and risks that the SBSL may have an impact on public, private or third sector or regulators. This BRIA is a progression from the partial BRIA that accompanied a public consultation on:

• The principles of introducing a SBSL;
• Operational matters relating to a SBSL; and
• What the impacts of a SBSL may be on housebuilders and on the supply of housing more widely

The consultation asked a wide range of questions covering the context for a Scottish building safety levy, the scope of the tax, exemptions, calculation methods, tax administration, compliance and impacts on businesses, children, the environment, equalities and island communities.

The public consultation on the SBSL should be seen in context with the larger, UK-wide level of engagement on funding cladding remediation efforts in both England and Scotland. An initial public consultation on the England-only Building Safety Levy was undertaken by the UK Government from 15 July to 21 October 2021. In November 2022, the UK Government issued a second consultation seeking views on the delivery of the Levy in England including how it would work; what the rates would be; who would pay; sanctions and enforcement as well as who would be responsible for collection. An analysis of this consultation was published in January 2024^[11].

A further technical consultation was carried out by the UK Government in January 2024, which sought views on the methodology for levy calculation, the collection process, disputes and appeals and further exclusions. An analysis of responses to the technical consultation was published on 24 March 2025. Although the differences in building control regimes mean that the English and Scottish levies will not be comparable, the policy objectives for both remains the same. The Scottish Government has therefore taken into account the feedback provided on both UK consultations, and on the joint UK and Scottish Government consultation on the devolution of powers for a Scottish building safety levy.

The Scottish Government’s public consultation was accompanied by a programme of stakeholder engagement, including drop-in sessions, roundtables and policy-specific meetings that took place to help raise awareness of the proposals and assist stakeholders in responding to the consultation. The roundtable events 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 full list of these engagements can be found below.

Building on the views provided through engagement the Scottish Government circulated an impacts questionnaire to stakeholders. The aim of the questionnaire was to gain more detailed evidence of the current cost to businesses within the current regulatory regime as well as the additional costs to their businesses that the SBSL brings. The questionnaire had three sections with each focussing on a key area of impact as supported by the views of the industry provided within the public consultation and other engagement. These were as follows: Financial and Administrative; Cumulative Regulatory; and Wider Impacts in relation to Land and Housing. This has aided in the engagement of a SBSL and communicated directly with those operating in the residential property development sector as well as other key stakeholders.

The programme of engagement has set out to raise awareness of the policy, gain informed perspectives on specific areas of policy impacts and design, and ensured that all stakeholders had the ability to meaningfully engage in the development process. This work contributed to our overarching aim of ensuring the design of the levy is compatible with the intended outcomes as well as meeting the needs of industry stakeholders.

3.2 Internal Scottish Government Engagement

Scottish Government officials have engaged with the following directorates, divisions and agencies:

• Revenue Scotland
• Scottish Government Legal Directorate
• Communities Analysis Division
• Directorate for Business and Better Regulation
• Directorate for Cladding Remediation
• Directorate for Housing
• Directorate for Local Government
• Directorate for International Trade and Investment
• Directorate for Energy and Climate Change
• Directorate for Agriculture and Rural Economy
• Directorate for Public Spending
• Directorate for Planning, Architecture and Regeneration
• Directorate for Public Procurement and Property Directorate
• Subsidy Control Unit

3.3 UK/Devolved Administrations Engagement

Scottish Government officials have engaged with the following:

• HM Revenue and Customs
• HM Treasury
• Ministry of Housing, Communities and Local Government
• Office of the Secretary of State for Scotland
• Welsh Government

3.4 Wider Public Sector Engagement

Scottish Government officials have engaged with:

• Convention of Scottish Local Authorities (COSLA)
• Local Authority Building Standards Scotland (LABSS)
• Registers of Scotland (RoS)
• South Lanarkshire Council
• North Lanarkshire Council
• Shetland Islands Council
• The City of Edinburgh Council
• Orkney Islands Council
• South Lanarkshire Developer Forum
• Highlands and Islands Enterprise Agency
• South of Scotland Enterprise Agency
• Scottish Land and Estates

3.5 International Engagement

No engagement has taken place with government organisations in other countries.

We are aware that the Australian state of Victoria has introduced a ‘Building Permit Levy’ (BPL), on its housebuilding industry, which is used to fund the Victorian Government’s Building Control, Domestic Building Dispute Resolution System and cladding rectification works. There are however, underlying differences between the Building Permit Levy and the SBSL that mean that a direct comparison of the policies is not useful. These differences are outlined below:

• The BPL is a State tax and is not enforced at a national level.
• The tax payer is the applicant for a building permit, or a person acting on behalf of the applicant.
• The BPL is calculated at the cost of building work for which a building permit is required.
• The Building Authority in Victoria may reassess the cost of building work and impose a penalty of up to twice the difference between this and that submitted.

3.6 Business /Third Sector Engagement

Scottish Government officials have engaged with business and third sector organisations through the establishment of the Expert Advisory Group^[12] for the SBSL (EAG). In addition to public sector representatives, the following external stakeholders are full members of the EAG:

• Homes for Scotland
• A&J Stephen
• Taylor Wimpey Scotland
• Springfield
• Institute of Chartered Accountants Scotland
• Chartered Institute of Taxation
• Law Society of Scotland
• Scottish Property Federation
• The Royal Incorporation of Architects in Scotland (RIAS)
• The Improvement Service
• Scottish Assessors Association

The remit of the EAG is to provide expert advice, challenge and scrutiny of policy positions, with the aim of ensuring that the design of the SBSL is compatible with its intended outcomes and meets the needs of industry and other stakeholders. The EAG also works to identify and offer solutions to any potential adverse impacts and unintended consequences that may arise from the introduction of a SBSL.

The EAG is intended to provide a broad view of subject matter expertise and perspectives and act as a sounding board: it is not responsible for setting direction or making recommendations, nor is it accountable for any decisions which will ultimately be taken by Scottish Ministers.

Chaired by a senior Scottish Government official, the EAG has met on five occasions since its inception. Discussions on the first two meetings focussed on the principles and key elements of the tax design, as well as the public consultation and programme of engagement. The third meeting considered an initial analysis of the responses to the public consultation. The fourth meeting considered Scottish Government proposals for engaging with small businesses and other sectors of the residential development industry as part of the BRIA process. The fifth meeting considered two specific policy proposals – a calculation method and a provision to support smaller developers. Subject to agreement by its membership, the EAG will continue to meet as the Bill progresses through Parliament.

In addition to the work of the EAG, officials have also undertaken separate engagement with Homes for Scotland, the Scottish Property Federation, the Law Society of Scotland, Scottish Assessors Association and the Royal Institute of Chartered Surveyors.

As part of the consultation process, Scottish Government officials undertook a programme of engagement with business and industry bodies. The programme of engagement also specifically sought to gain the views and concerns of SME housebuilders on the implications and impacts of the policy.

The Scottish Government’s engagement strategy on the SBSL aligned with the following Business Engagement Principles:

1. Respect – where possible, the Scottish Government proposes to utilise a method of co-design with the housebuilding industry, to ensure that businesses are given an active opportunity to contribute to the development of a SBSL.

2. Engagement – we have undertaken meaningful engagement with a wide range of industry bodies at the earliest possible opportunity, including the establishment of the EAG. We will continue to engage with businesses, through the EAG, the public consultation, and through targeted engagement sessions to help inform development of the policy and an assessment of its impacts.

3. Evidence – to support informed decision making, we have worked with industry bodies and our local government partners to establish an evidence base for measuring impacts of the policy against.

4. Awareness – the Scottish Government will measure the impacts from this policy against the wider regulatory environment for the housebuilding industry, and propose this policy to be considered by the Regulatory Review Group

5. Consistency – we have sought to validate any findings from our engagement and internal analysis with industry representatives, through the EAG, to ensure a consistent approach to the assessment of a SBSL.

6. Communication – we have undertaken public communications as part of our programme of engagement, including promotion of the public consultation, the targeted engagement sessions, and the impacts questionnaire.

3.7 Small Business Engagement

The Scottish Government recognises that a new tax on residential housebuilding could disproportionately impact small housebuilders. Research from the Home Builders Federation estimates that the proportion of new housing build by SME’s has fallen from 40% in 1988 to 12% in 2017.^[13]

To support engagement on this, we have ensured that there is representation from one small housebuilder on the EAG (A&J Stephen). Additionally, as part of our strategic engagement programme which accompanied our consultation, we held a roundtable session specifically focused on SME impacts.

In addition, in taking forward a programme of engagement, we have undertaken targeted engagement work in the form of an impacts questionnaire to aid in gaining a fuller understanding of potential impacts. This is with the aim of engaging further with developers, specifically SME businesses, on our policy proposals.

The EAG considered the draft questions for the public consultation on a SBSL for Scotland as well as the draft questionnaire. A summary of these discussions is available on the webpage^[14].

3.8 Public consultation

The public consultation on the SBSL ran for eight weeks, from 23 September to 18 November and sought views on option 2, or the introduction of a Building Safety Levy in Scotland. The consultation questions were structured around three parts:

1. The Principles of introducing a SBSL– the case for using new residential development to pay for cladding remediation work on existing residential buildings, who should be in scope to pay the levy and the method for calculating the charge

2. Operational considerations – who should collect and administer the levy, how returns should work, and how compliance and enforcement measure should work where needed

3. Impacts of a SBSL – these questions aimed to assist in gathering information from the industry on the sort of impacts a levy could have on the housebuilding industry, helping inform our Final BRIA, alongside consideration of other impacts such as island communities, equalities and data protection.

The consultation was published on Citizen Space and on the Scottish Government website. Officials engaged with industry bodies and wider stakeholders to promote awareness of the consultation with the wider housebuilding industry.

3.9 Consultation Response

A detailed overview of the consultation process and the feedback received is set out in a consultation analysis report.^[15]

The following is a summary of the five key themes of the consultation and programme of engagement:

• Principle of the SBSL: the majority of respondents to the consultation were opposed to the introduction of the SBSL. Those who opposed were predominantly developers and organisations representing the residential property industry. Those who opposed noted the SBSL would be an additional burden on developers, some of whom are already contributing to the cost of cladding remediation. Those supportive of the introduction of the SBSL were primarily non-developer organisations, including the National Fire Chiefs Council, the National Trust for Scotland and Local Authority Building Standards Scotland.
• Scope: there was strong support from respondents to exempt affordable housing from the SBSL, though some attendees at engagement sessions raised the importance of recognising the interconnectedness of the sector as a whole. Responses also indicated strong support for excluding smaller developers, noting that SME builders face unique challenges with cashflow, profit margins, development viability and administrative burdens relative to larger developers.
• Calculation: while respondents largely recognised the proportionate benefits of using a market value approach to calculation, the majority opposed using market value as the calculation method for the SBSL, with emphasis on the need for stability and certainty for developers in understanding their tax liability.
• Administration: a majority of respondents were in favour of the proposed approach for Revenue Scotland to administer the SBSL, and for Revenue Scotland to be granted the investigatory and enforcement powers that mirror provisions for existing devolved taxes. Developers, other housing stakeholders and local government bodies also strongly agreed with the proposals for dispute resolution.
• Impacts: respondents and attendees repeatedly raised the cumulative impact on housebuilding from a wider package of proposed policies and new regulatory burdens, emphasising the need to a holistic approach and to consider any potential impacts from the SBSL through this lens.

Whilst there was general opposition to the introduction of a SBSL to fund cladding remediation efforts, no immediate alternative solutions were offered by respondents to address the funding challenge associated with cladding remediation. This is consistent with the responses to the consultation we ran jointly with the UK Government earlier in 2024 to inform the request for the transfer of powers for a SBSL.

3.10 Other stakeholders

Other stakeholders relevant to the development of a new tax, such as the Chartered Institute of Taxation and the Law Society of Scotland, have been included as members the EAG.