Chamber and committees

I thank the committee for its engagement and scrutiny on the bill so far. I have had good engagement with individual members on their proposed amendments, and that has been very welcome. I am keen that we continue in that constructive spirit today.

On Michael Marra’s comments, we all understand—I hope—that there is a requirement to fund the cladding remediation programme over the lifetime of the requirement for those works. The cost is significant. As we know, it runs into billions. The funds that will be applied from the levy will form only a part of that. The money has to be found from somewhere—if not from this route, from elsewhere in the Government’s capital budget and, potentially, even from the affordable homes budget. Not having the levy and finding the money from elsewhere is not a get-out-of-jail-free card. Funding would have to be found from another of the Government’s capital budgets.

I do not think the bill is unviable. It is absolutely viable.

We have carried out the impact assessment on that, and we will continue to update it, depending on where we get to with the various amendments to the bill that are being debated now and will be considered at stage 3. We are aware of the profile of the sector and of the impact that any of the amendments would have on the market—which we will discuss as we move through the amendments—and the impact that the exemptions would have on the remaining tax base. We have done quite a bit of work to understand that, and we have done the impact assessment across the whole sector.

Amendments 1 and 2, in my name, are minor technical adjustments to the wording of section 4. The changes clarify the position for buildings that have parts with different uses. Only those parts of a building to which the definition applies will be considered as dwellings or other accommodation for the purpose of the levy. I believe that all interested parties would welcome that minor change.

Amendment 4 makes a change to the definition of the taxpayer for the levy, namely the owner of the property at completion. The Scottish Government has tested that definition with Revenue Scotland and the Law Society of Scotland, which identified that, in specific cases, it is possible that more than one person could be considered the taxpayer. For instance, if the tax point were to occur during the period when the property had been sold but the title had not yet been registered, that would risk uncertainty for taxpayers in such cases. Amendment 4 therefore seeks to remove any such uncertainty by providing a clearer definition.

Amendments 16 and 19 both seek to introduce a form of transitional provision, and the Government cannot support those amendments. We recognise the need for developers to have advance certainty of what their liability to the levy will be, and that is why I took the decision to move the commencement date of the levy back one year, to April 2028. I have also committed to publishing the first set of indicative rates for the levy in June 2026. That will give developers 22 months of advance certainty of their levy liabilities, and that is provided in lieu of potential complex transitional provisions.

My view is that delaying the commencement of the levy and publishing the first set of indicative rates 22 months ahead of time already provides sufficient notice for developers to plan their affairs accordingly. Amendments 16 and 19 would only add complexity and would depress much-needed revenues. I urge the committee not to support those amendments.

I am happy to discuss the issue further in the context of conversions more widely, because I absolutely agree that we should seek to find ways to support such conversions. I simply think that there is a specific issue with the amendment with regard to it being targeted at listed buildings.

I already indicated in my response to Michelle Thomson that we understand the intent behind the amendments. The issue is that, as drafted, they would require the developer to know in advance who they were going to sell to, which, obviously, is not always going to be the case. However, we are very happy to work with you and Michelle Thomson to see whether there is some other way in which what is being proposed can be given effect to.

I should also clarify that, when I mentioned LBTT earlier, it was in the context of things that we were already doing, and I apologise if that was not clear. As for the levy, we are happy to sit down and see whether there is a way to do this, but members should bear in mind that, if this leads to 22 per cent of sales coming out of the tax base, there will be a corresponding increase in the levy applied to other units.

Will the member give way?

As I said, within the capability of access to appropriate data, we would want to provide information that could help in assessing the impact of the levy. As I have indicated, a range of factors affect the housing market, so picking out the impact of the levy in isolation would prove challenging. However, I repeat that I am happy to engage with members in advance of stage 3 to give more information and assurance on that point.

I note that the UK Labour Government does not require a similar assessment to be carried out for its building safety levy in England. I also remind members that, as in other areas, the Scottish Parliament will have the ability to take stock of the levy scheme at any point, including when regulations are made or changed. I have no doubt that ministers will receive feedback once the levy is operational and will adjust as required.

I am sympathetic to the aim of the amendments that have been lodged by Michelle Thomson, Liz Smith and Mark Griffin. However, I ask them not to press or move those amendments but instead to take the opportunity to discuss with me ways in which the potential impacts of the levy can be measured and reported on as part of the strengthened three-year reporting requirement under amendments 9 and 10. Members across the Parliament will want to ensure that any policy that we enact has the desired effect, and I welcome suggestions on ways in which those impacts might be effectively monitored and assessed once the levy is in place.

Given that, even with the 19-unit allowance—I will come on to talk about the 29-unit allowance shortly—79 per cent of developers would already be exempt from paying the levy, who in the market is the member targeting her amendment at?

I thank members for lodging the amendments in this group. I start by addressing amendments 30 and 31, in the name of John Mason, which would place a requirement on ministers to introduce reliefs using their regulation-making powers in section 11, including a relief of no less than 50 per cent for units that are created on brownfield land. The Government has already committed to introducing a reduced rate of a maximum of 50 per cent for new residential units that are built on brownfield land, and amendment 31 would deliver a broadly similar effect.

In response to Patrick Harvie, I think that the answer is that both approaches would deliver the same effect. John Mason made the point about giving certainty in the bill at this stage to those who are seeking to develop on brownfield land, in order to encourage such development. The Government is sympathetic to that aim and we are, therefore, minded to support amendments 30 and 31.

With regard to amendments 32 and 44, in the name of Craig Hoy, a viability-based relief would significantly increase the complexity and administrative burden both for taxpayers and for Revenue Scotland, which would have to assess detailed commercial appraisals and make subjective case-by-case judgments of financial viability. That would move the levy away from a clear rules-based tax that applies equitably and fairly across the tax base to a system that would increase uncertainty for taxpayers and deliver inconsistent outcomes, and which would—I have no doubt—clog up the tax system with the number of assessments that would need to be carried out. In that context, it is difficult not to see these amendments as wrecking amendments, so the Government cannot support them.

I understand the aim of amendment 53, in the name of Michelle Thomson, as I did her earlier amendments on exemptions. However, I have already spoken to the operational challenges of ensuring compliance with an exemption for units that are sold to first-time buyers and the significant impact that that would have on the tax base, so I cannot support this amendment. I stress again that I am happy to discuss alternative measures to support first-time buyers.

On Meghan Gallacher’s amendment 33, I note that the very purpose of having the levy-free allowance to begin with is to exempt smaller developers from the charge by way of an annual allowance of tax-free units; I will come on to talk about the threshold in a minute. As such, I am not clear on what Meghan Gallacher’s amendment is seeking to address or what problem it is trying to fix. Given that I have already indicated that more than 79 per cent of developers are exempt under the 19-unit allowance from interacting with the levy at all—and we could be about to increase that—who, exactly, is her amendment targeting support at? I asked her that question earlier and she could not answer.

Amendments 54, 55 and 57 seek to set a minimum levy-free allowance threshold at 29 units. During the stage 1 debate, I set out the Scottish Government’s position that the levy-free allowance would be set at 19 units. That would exempt 19 per cent of new-build sales from the levy and, as I said earlier, remove 79 per cent of developers from any requirement to interact with the levy at all. A 19-unit allowance, combined with all other exemptions in the bill, would leave 53 per cent of the eligible tax base chargeable. I am sympathetic to calls from the industry, such as from Homes for Scotland, for the threshold to be raised to 29 units. It is important to look at the data. A 29-unit allowance would exempt around 23 per cent of new-build sales, which is an increase from 19 per cent. It would also remove 85 per cent of developers from the levy, which is an increase from the 79 per cent that I indicated earlier. A 29-unit allowance, combined with all other exemptions in the bill, would leave 50 per cent of the eligible tax base chargeable.

It is important to recognise that, given that 79 per cent of developers would be excluded under the 19-unit allowance, increasing the threshold to 29 does not, in fact, benefit the vast majority of small and medium-sized businesses. I take on board Michelle Thomson’s point that some of those businesses might have aspirations to grow larger, which we would not want to stand in the way of. However, ironically, the benefit of increasing the threshold to 29 would fall disproportionately on larger developers. It would also have the effect of pushing up the levy per unit, because the tax base would be marginally smaller. There would therefore be a number of counter-implications. However, on balance, we are minded to support the principle of a 29-unit allowance, and the Government will therefore support amendments 54 and 55.

We are not able to support amendment 57 due to the restrictions that it would place on ministers’ ability to tailor the allowance to reflect changing conditions in future. I therefore ask Michelle Thomson not to move amendment 57. Amendment 56, which is also in Michelle Thomson’s name, would allow for the carrying forward of an unused allowance. Although such a provision could increase complexity in the administration of the levy, the Government is content to allow for the power to deliver a carry-forward provision, because we recognise that, on the margin, it could prevent smaller developers from having to behave in a way that would be inefficient in seeking to complete or not complete units in order to meet arbitrary financial year-end dates. We are therefore minded to support that provision.

In response to Michelle Thomson’s remarks on cross-border competitiveness, I note that the reverse is also true. It is worth noting that the levy in England has no provision for any delay in payment—the whole payment is due up front. I look forward to our conversations to explore that issue.

Amendment 7 agreed to.

Section 17, as amended, agreed to.

Section 18 agreed to.

Section 19—Accounting for levy by return and time for payment

Amendment 58 not moved.

Section 19 agreed to.

Sections 20 and 21 agreed to.

After section 21

Amendment 8 moved—[Ivan McKee]—and agreed to.

Sections 22 to 44 agreed to.

Before section 45

Amendment 59 not moved.

Section 45—Report on operation of Act

Amendment 37 not moved.

Amendments 9 and 10 moved—[Ivan McKee]—and agreed to.

Amendment 38 moved—[Liz Smith].