Community Infrastructure Levy – Government responds to consultation on reforms to the regime – Changes expected to come into force by end of January 2014

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Summary: The Government has published its response to a consultation on reforms to the CIL regime published in April of this year. It intends to take forward the majority of the reforms proposed in the 25 consultation questions although there are some important variations suggested, including a partial retreat from its proposal to abolish the vacancy test. The changes are expected to come into force in January 2014.

You should read this article if you have been keeping track of the Government’s proposals for reform to the CIL regime and in particular the proposals to abolish the vacancy test.

Background

The Government has published its response to a consultation on reforms to the Community Infrastructure Levy (CIL) regime published in April of this year.  It intends to take forward the majority of the reforms proposed in the 25 consultation questions although there are some important variations suggested.

The Government intends to lay new regulations in Parliament to implement the changes before the end of the year with the changes coming into force by the end of January 2014.  Further non-statutory guidance is also expected.

Vacancy test will remain but with an extended period of 3 years

A key area of the reforms which we highlighted in our previous blog was the proposal to remove the “vacancy test”, namely the requirement that a building must have been occupied for at least 6 of the last 12 months.  This is a condition which developers currently have to satisfy if claiming a discount from CIL liability when they are either demolishing or refurbishing an existing building as part of their proposals.  It was, in our view, positive news for the development industry that the consultation proposed outright abolition of the vacancy test in all cases save where the use has been abandoned.  Complex development sites often unwitting failed the vacancy test because of the time taken to piece them together.  The proposal would have meant that CIL would normally not be payable on buildings that are refurbished or redeveloped other than where there is an increase in floorspace as part of the proposals, even if they have been vacant for some time. 

However, the Government is now proposing that the vacancy test is diluted but not abolished in its entirety.  Buildings that have been in use for a continuous period of 6 months in the last 3 years (rather than the last 12 months) will benefit from a discount to CIL liability.  This change to the proposal in the consultation paper has been introduced in order to appease those local authorities who objected to reliance on an abandonment test because (they maintained) it would be difficult to prove the intent of an owner.

Alongside this measure the Government is also proposing that developments where the use of a building is not changing will be exempt from CIL, other than where there is an increase in floorspace or where the previous use has been abandoned.

Although the Government’s response now represents a partial retreat from its initial proposal, the new reforms are still an improvement on the existing rules.  They should therefore assist developers who are seeking early vacant possession of a site other than in the case of major regeneration projects where possession is required more than 3 years before development is ready to be commenced and the use of the building is changing.

More flexibility to be allowed for changes to schemes during construction

Previous reforms to the CIL reforms ensured that where changes were made to schemes by way of planning permissions granted under section 73 of the Town and Country Planning Act 1990, multiple CIL payments or liabilities would not be triggered.  The Government intends to implement its proposal to extend the abatement provisions for previous payments of the levy so that they apply to new planning permissions which are brought forward under a new, stand alone, planning application to make changes to an existing scheme during construction.

The proposal will now also be expanded so that any “levy payments made in respect of an incomplete building can be credited against site-wide liability, in the event of changes to the overall scheme between commencement and completion.” This is a helpful proposal which should mean that developers do not have to pay twice (or possibly more in a complicated scheme) for the same overall  net increase in floorspace on a development site.

Highway agreements relating to the trunk road network will be exempted from “double dipping” restrictions

Other areas where the final proposals differ from those included in the April consultation include:

  • The consultation proposed that developers would not face “double dipping” where section 278 highways agreements can be used instead of section 106 agreements to fund highway infrastructure which is also included in a CIL infrastructure list.  This risk is still there for local roads but highway agreements relating to the trunk road network drawn up by the Highways Agency, Transport for London or Welsh Ministers will be exempted from CIL.
  • The consultation period on the draft charging schedule will not be extended from four to six weeks.
  • Charging authorities will continue to be able to determine at their own discretion how to consult on any amendments to their lists of infrastructure projects funded by CIL receipts (the “regulation 123 lists”).
  • In relation to “in kind” payments, the CIL Regulations will not replicate the EU procurement limits applied in other regulations.
  • Residential extensions and annexes will be exempted from the CIL regime.

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