Following a consultation last year, the Building Safety Levy (Scotland) Bill (the Bill) was introduced into the Scottish Parliament on 5 June 2025 and seeks to introduce a new tax: the Scottish Building Safety Levy (SBSL). The SBSL will tax developers in relation to the construction of new residential buildings and will be ‘for the purposes of improving the safety of persons in or about buildings in Scotland’, specifically around the cost of remediating residential buildings with unsafe cladding.

The Bill has been based on and resembles the levy being introduced in England for the same purpose, as part of the changes under the Building Safety Act (the "BSA") but does not directly mirror the position in England.

The Bill was introduced in response to the Grenfell Tower fire in June 2017, which raised significant concerns regarding the safety of external wall cladding systems on medium- and high-rise buildings in the UK. This incident led to the implementation of the Scottish Government’s Cladding Remediation Programme (CRP).

The CRP specifically targets multi-residential domestic buildings constructed or refurbished between 1 June 1992 and 1 June 2022, with a height of 11 metres or more, and that feature an external wall cladding system, but the SSBL will apply to new residential buildings of all heights.

The CRP requires significant funding with expenditure estimated by the Scottish Government Cladding Directorate to reach between £1.7bn and £3.1bn over 15 years. It is estimated that the implementation of the SBSL will bring in approx. £30 million a year.

What does the SBSL apply to?

The SBSL applies to “new residential units’ (NRUs) which are either newly-constructed buildings intended for accommodation at the time of completion or conversion of an existing building to a dwelling—for example:

  • new homes built by developers for onward sale
  • new purpose-built accommodation (student flats and build-to-rent properties are specifically mentioned as being included)
  • redevelopment of existing buildings to provide residential accommodation

There are some excluded categories of NRU including:

  • temporary residential accommodation e.g hotels, inns and similar establishments
  • residential institutions which provide accommodation for (a) children or (b) adults alongside personal care for reasons relating to old age, disability, alcohol or drug use or mental health
  • hospitals and hospices (both private and NHS)
  • military barracks and other residential accommodation for use by members of the armed forces

There are also some exemptions:

  • conversions if they do not result in the creation of a greater number of dwellings than previously
  • social housing or affordable housing
  • housing on certain islands

There is provision for regulations amending these exemptions in the future.

When are these levies payable?

The SBSL will be imposed upon taxable building control events which is the building completion date in respect of a NRU, being either:

  • the acceptance of a completion certificate for the works, in accordance with the Building (Scotland) Act 2003; or
  • if earlier, the grant of permission for temporary occupation of the building

Who is liable to pay the SBSL and to whom?

Under the SBSL the owner of the NRU at the time of submitting the completion certificate application or temporary occupation request is liable for the costs of the levy – most likely the developer.

Thus, subsequent sales of the property or changes in ownership do not affect liability for the SBSL.

It is worth noting that the Bill allows Scottish Government through regulations to create a ‘levy-free allowance’. The allowance would be set for individual taxpayers and is intended to mitigate the effect of the SBSL on smaller developers.

A party will calculate in each tax year how many taxable events have occurred, the relevant levy appropriate to each, if any relief or levy free allowance applies and will account to Revenue Scotland for these each year. Revenue Scotland are to set up a Scottish building safety levy register and if a taxable building control event occurs in relation to an NRU that a party owns then they must apply to be added to the register. One can also register in advance of such event.

How will the SBSL be calculated?

The rate of the SBSL will be based on the floor space of NRUs. While specific rates will be set through regulations, the Bill allows for:

  • different rates for different geographical areas
  • potential reduced rates for brownfield development
  • flexibility to adjust rates through secondary legislation

Consequences for noncompliance

Amendments to the Revenue Scotland and Tax Powers Act 2014 permit the imposition of penalties for various defaults related to the SBSL. The Scottish Government stated that the scheme of penalties is similar to those which apply in respect of other devolved taxes.

Next steps

The Bill is still at Stage 1 and must pass through the other stages of the relevant legislative process through the Scottish Parliament. The precise timescales for completion are uncertain. The targeted date for operation is 1 April 2027.

However, until the regulations are published that set the actual levels of the levy the impact on developers of NRU cannot be properly ascertained. One can perhaps look to the anticipated levies in England for some guidance, but the Scottish Government will be setting their own rates. The Building Safety Levy in England was due to be operational in Autumn 2025 but has now been pushed back to Autumn 2026.

Contributors

Daryn Byron

Attorney qualified in South Africa

Kirsteen Milne

Partner