Scottish Building Safety Levy: technical consultation

4. Exempting converted buildings from the Levy

4.1 Definition of a conversion

Under the 2024 Act, new residential units that are created through the conversion of an existing building which previously was for a use other than as a dwelling are within scope of the SBSL. Examples of this work include the conversion of an office building, school or church into a series of dwellings or block of flats.

In cases where work has been undertaken on a building which was, prior to building work, wholly or partly used as a dwelling, the SBSL only applies where at completion of the work the building has a different number of parts intended to be used as dwellings. For example, if a large house is converted into a set of apartments, then as these apartments are intended to be used as dwellings, the completed units would be liable for the SBSL. Similarly, if a group of four flats is converted into a larger, single dwelling, then the completed unit would be liable for the SBSL. However, if work was undertaken on a block of six flats, which remained six flats at completion, then the completed units would not be liable for the SBSL as the number of parts intended to be used as dwellings remains the same. This position aligns with the UK Government’s proposals for its levy to apply to converted buildings.

The Scottish Government consulted on the inclusion of conversions prior to the introduction of primary legislation. Views from consultation respondents were mixed on the inclusion of conversions within scope. Some expressed the view that conversions should be exempt to encourage re-use of existing and historic buildings, given the positive environmental impact of these development projects. Others disagreed and considered that conversions should be within scope, given that these types of developments may have historically contributed to the problem of unsafe cladding, and to share the cost across the sector as a whole.

During the passage of the 2026 Act, the Scottish Government and the Scottish Parliament engaged with stakeholders on the scope of the SBSL, including the treatment of conversions. Concerns were raised from stakeholders on the impact of the tax on historical and heritage buildings, noting these buildings typically involve significantly higher costs to use and their inclusion in the tax base could discourage their reuse.

The Scottish Government recognises the potential benefits of providing a further relief or exemption for conversions, whereby the lack of a levy applying would offset any additional costs associated with converting existing buildings. This would also align with the Scottish Government’s NPF4 commitment to promote and facilitate the reuse of brownfield, vacant and derelict land and empty buildings. However, doing so may confer an advantage to developers that undertake conversion work in comparison to those that do not. Removing conversions from scope – either partially or fully - would also restrict the SBSL’s ability to raise revenue.

We are therefore seeking views on the principle of relieving or exempting all or certain types of conversions from the SBSL. This proposal should be taken in conjunction with the proposed 50% reduced rate for brownfield development, meaning that any converted units still in scope would be subject to a further reduction of up to 50%.

The following are examples of conversions that can (but not always) fall within scope of the SBSL:

• conversion of a hotel to one or more dwellings
• sub-division of a house into two or more flats
• building works which turn two dwellings into one dwelling within a single building

4.2 Impact on tax base

Removing all conversions covered by this definition would exempt approximately 4% of the tax base. However it is possible that some of these units may be covered by the existing suite of exemptions (affordable housing, levy-free allowance etc), therefore the actual impact on the tax base may be lower. The vast majority of these conversions are new dwellings completed from the conversion of non-domestic properties, with the remainder being additions resulting from the sub-division of existing residential buildings.

These conversions mostly take place in urban local authorities, in particular City of Edinburgh, Aberdeen City, Aberdeenshire, Fife and Dundee City.

Question 11: Do you agree that a further relief or exemption should be provided for conversions?

Question 12: If you agree that a relief or exemption should be applied for conversions, should this relief apply to the conversion of non-residential buildings, residential buildings, or both?