Community Infrastructure Levy – new changes - what to expect

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Summary: The Community Infrastructure Levy (Amendment) Regulations 2014 were published in draft last week and are expected to come into force in January 2014. When effected, the amendment Regulations will bring into force the reforms to the CIL regime promised by Government in its response to consultation published in October. Tim Smith reports on some key areas of reform including changes to the vacancy test and a change to the date for calculating CIL liability for non-phased permissions.

You should read this if you are keeping up to date with the anticipated reforms to the community infrastructure levy, including changes to the vacancy test and the ability to pay CIL in phases.

Background 

Draft Regulations were published last week to effect the changes Government promised in October in its response to earlier consultation on the CIL regime.  The Regulations are expected to come into force in January of 2014.  I highlighted the main reforms in my previous blog but now the draft Regulations have put some flesh onto the bones of the proposed changes, a number of important details have emerged.

CIL payments to be made in stages for phased developments

We knew that changes were going to be made to the CIL Regs to allow CIL payments for planning permissions allowed to be carried out in phases (for both detailed and outline permissions) to be made prior to commencement of a relevant phase of the development, rather than all at commencement of the development.  This has duly been delivered by the draft Regulations as well as an important change to the date when ‘planning permission first permits the development’ for non-phased permissions.

This date is the date when the amount of liability is calculated.  For non-phased permissions, the date when planning permission “first permits” the development will now be the date that the permission is granted rather than when the last pre-commencement condition is discharged. This is an important change when calculating any discount to CIL liability in relation to existing buildings in lawful use on the development site, as we discuss in more detail below.

Changes to the vacancy test now mean that existing buildings only have to be lawfully occupied for 6 months of the previous 3 years

As expected, the draft Regulations have relaxed the vacancy test so that existing buildings which are to be demolished or refurbished as part of the redevelopment of the site have to be in lawful use only for 6 months of the previous 3 years before the date that planning permission first permits the development.  The previous Regulations required a lawful use for 6 months of the previous 12 months.

Another helpful change is the introduction of the ability for an existing building to qualify for a discount where the intended use following completion of the chargeable development is a use that is able to be carried out without further planning permission being required.  This amendment appears to apply to those existing buildings which, due to their not being in lawful use, are unable currently to qualify for a discount but where Government recognises there will be no material change of use.

Credit will also be available for existing buildings that are demolished in one phase of the development to be carried over into subsequent phases.

For non-phased planning permissions, the change to the date on which planning permission “first permits” the development is important.  The date will now be the grant of planning permission, so developers will only have to establish lawful use of existing buildings on a site which are to be demolished or refurbished as part of the development for 6 months in the 3 years before permission is granted, rather than the inevitably later date of when the pre-commencement conditions have been discharged.  This should make it much easier to obtain vacant possession.

More detail has been provided in relation to the other changes

  • There are a raft of changes relating to social housing relief.  In summary, when calculating CIL liability, rental housing provided at no more than 80% of market rent will be eligible for social housing relief; communal areas will benefit from relief; and there will be a new discretionary social housing relief for certain discount market sale housing.
  • As expected, the draft Regulations provide an exemption from CIL for residential annexes and extensions and for self-build housing.
  • There will now be an ability to provide infrastructure as well as land as a payment in kind.  This will only apply if the charging authority has given notice that it is willing to accept infrastructure payments in its area and given a policy statement setting out the infrastructure projects or types of infrastructure which it will consider accepting.
  • Our previous blog made reference to new abatement provisions under which levy payments made in respect of an incomplete building will be able to be credited against site-wide liability, in the event of changes to the overall scheme between commencement and completion.

More detail has now been included.  Buildings constructed under an earlier permission must not have been completed when the request for abatement is made and a developer cannot use the existing buildings constructed under the earlier permission to claim a discount to their CIL liability in relation to the later permission.

Any request for abatement must be made before the later permission is commenced and proof of any CIL paid under the earlier permission must be provided.

  • The proposals to prevent “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 have found their way into the draft Regulations.  As expected, the restrictions will not apply to highway agreements relating to the trunk road network drawn up by the Highways Agency, Transport for London or the Welsh Ministers.
  • There is to be an extension of time within which local authorities can continue to pool 106 contributions towards infrastructure.  A further 12 months, until 6 April 2015, is given.
  • The draft Regulations amend the existing provisions on rate setting so that different rates can be set by reference to the scale of the development to reflect local circumstances and the impact of the levy on viability of development.

Transitional provisions mean that the changes will not apply to permissions granted before the amendment Regulations come into force

The draft Regulations set out the transitional provisions.  If a permission is granted before the amendment Regulations come into force, the provisions relating to phased permissions will not apply.  Similarly, the provisions relating to calculating the amount of CIL due (including any available discount) will not apply if a liability notice is issued before the amendment Regulations come into force.

Finally, the provisions relating to highways agreements will not apply in relation to highways agreements entered into before the charging authority has published an infrastructure list, or  after a date 2 months from when the Regulations come into force or after 6 April 2015 whichever is the sooner.

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