On 19 April 2024, the Scottish government announced that it had secured powers to introduce a building safety levy for developers to help pay for remediation costs.
The tax on developers will be considered by the Scottish parliament to raise further funding to “fix unsafe cladding” as part of its cladding remediation programme, similar to the UK government’s Building Safety Levy for England.
The announcement is in line with Scotland’s 2023-24 Programme for Government, where the government outlined its intention to seek a transfer of powers. In January 2024, the UK Treasury launched a consultation seeking responses on “devolving powers” for a Scottish Building Safety Levy, and whether the new tax might potentially “create or incentivise economic distortions and arbitrage within the UK”. The consultation response, also published on 19 April, concluded:
“This consultation has produced no evidence which would suggest that devolving the proposed tax power, as the UK Government is inclined to do, would impose a disproportionate negative impact on UK macroeconomic policy or impede the single UK market in house building. Nor was there sufficient evidence that the power to introduce a Building Safety Levy should be not devolved to the Scottish Parliament.
“Therefore, the UK Government is willing to proceed with the devolution of the power to introduce a Building Safety Levy and the Scottish Government is willing to receive this power.”
In its detail of outcome, the HM Treasury confirmed: “Following this joint consultation with the Scottish Government, the UK Government will propose legislation to devolve powers to the Scottish Parliament so that the latter can legislate for a Scottish Building Safety Levy.”
It is understood that the proposed Scottish Building Safety Levy will apply to the construction of new residential buildings, thus “mirroring measures being introduced in England through the Building Safety Act passed by the UK Parliament”.
Shona Robison, the Deputy First Minister and Finance Secretary, said: “We are determined to safeguard people living in buildings with unsafe cladding. I know that developers share this determination and have made significant progress to date.
"However, it is clear more needs to be done and these powers will ensure that developers make a fair contribution to address building safety defects in Scotland, just as the UK Government is asking them to do in England. I welcome the UK Government’s collaborative approach on this issue.
“It is important that we also continue working side by side with developers. To that end, and in line with our New Deal for Business and Framework for Tax, we will now liaise with the sector to ensure this levy best contributes to our mission of keeping people safe.”
As reported by Construction News, the announcement has been backed by the Chartered Institute of Building (CIOB) in Scotland. Policy and Public Affairs Officer, Jocelyne Fleming said:
“This decision could lead to a much-needed new system to ensure appropriate funds are raised to support the country’s cladding remediation programme and will allow buildings in Scotland to take priority.
“It is, however, vital that careful consideration is given to how such a levy will impact SMEs and what measures can be put in place to ensure the levy costs are not passed onto consumers.”
In November 2023, the FPA reported on the Scottish government’s newly launched Cladding Remediation Bill. Further details can be found here.