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Sweetening the bitter pill of CIL – outcome of government consultation announced

29 November 2013

Following a recent consultation on changes to the community infrastructure levy (CIL), the government has decided to adopt the majority of its proposals. This will be welcome news to developers, particularly the announcement that the changes to the current s106 system will be delayed by a year to April 2015, giving authorities more time to introduce CIL. A detailed draft of the proposed regulations is awaited, but the changes are intended to come into force by the end of January 2014.

Setting the levy:

  • The test applied to finding the appropriate balance between maximising CIL and impact on development viability will be tightened up, requiring authorities to produce more evidence at examination.
  • Differential rates based on the scale of development will be allowed (eg between small shops and superstores), removing the argument as to whether the current Regulations allow this.
  • A draft Regulation 123 list setting out the infrastructure to be funded by CIL must be provided at examination. Unhelpfully, the need for consultation on subsequent changes to the list will be left to charging authorities to determine.
  • The changes will not apply to authorities with a published draft charging schedule.

Calculating CIL liability:

  • At present, each separate phase of an outline permission attracts its own CIL. This will be extended to full permissions.
  • CIL liability is calculated on the date on which a permission "first permits" development.  For full permissions subject to pre-commencement conditions, this is the date on which those conditions are finally discharged - this will be simplified by changing it to the date of grant of permission. For outline permissions, the date will remain the date of final approval of reserved matters.
  • At present, to obtain a reduction from CIL in respect of existing buildings to be retained or demolished as part of a development, part of those buildings must be in lawful use for a period of at least six months during the 12 months before a permission "first permits" development. This will be extended to six months in the last three years, to give developers more flexibility in obtaining vacant possession. 

Further changes:

  • Relationship with s106: At present, from April 2014, restrictions on pooling of s106 contributions will come into effect. This is the main driver for the introduction of CIL for those authorities with pooling policies in place. The deadline will be pushed back to April 2015 to give those authorities more time to introduce CIL. That may give  developers, in areas where CIL is not yet in place, more time to obtain permissions ahead of CIL.
  • Recalculation: Where affordable housing is varied during the construction of development, the changes will allow CIL to be re-calculated.
  • Payment in kind: Infrastructure to be provided on or off site will count as a "payment in kind" towards CIL, with the contribution towards CIL based on actual construction costs and fees. Public procurement issues may arise if the EU procurement rule thresholds are exceeded. This may be limited to infrastructure on the Regulation 123 list.
  • Abatement: The current abatement provisions relating to s73 applications will be extended to other permissions for scheme changes. The aim is to ensure that CIL is not levied twice in respect of the same overall net increase in floor space.
  • Social housing relief: Authorities will have discretion to give social housing relief for discounted market homes meeting defined criteria. Changes will ensure that affordable rent properties will qualify for mandatory relief and relief will apply to communal areas in proportion to the social housing within the development. Consideration is being given to extending the relief to charitable bodies providing affordable housing.
  • Exceptional circumstances relief: The current rule restricting this relief to cases where the cost of complying with a s106 agreement exceeds CIL liability will be removed, although relief will not be applicable unless there is a s106 agreement.
  • Self-build: There will be relief from CIL for all homes built or commissioned by individuals or groups for their own use and for community group self-builders, to be reviewed after three years. There will be a "tough eligibility test" - self builders will have to declare that their project qualifies for relief and submit evidence on completion. Residential extensions and free standing residential annexes within the grounds of existing homes will also be exempted.
  • Appeals: Appeals will be allowed after development has commenced. The response states that this could apply to retrospective permissions, s73 or new permissions, but it is hoped that the detail will enable developers to get on with implementation but still challenge the amount of CIL stated to be payable. Discretion will be given to the appointed person undertaking the review to extend the 14 day representation period.

These changes are, in the main, helpful in simplifying the existing system. It is likely that further changes will be required in the future, as the regime continues to bed down.

For more information please contact Claire Fallows, Partner

T: +44 (0)20 7427 6722