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The new CIL Regulations: The end of the beginning or the beginning of the end?
17 February 2010
Following public consultation in 2009, the Community Infrastructure Levy (CIL) Regulations were put before Parliament on 10 February. Subject to House of Commons approval, they will come into force on 6 April 2010.
However, the Regulations may be short-lived should a new Conservative government make good its commitment to abolish CIL and replace it with a local tariff-based structure.
Some of the major concerns and issues raised during consultation have been taken on board and the Regulations vary from the draft regulations in these key areas:
- Social Housing Relief (SHR) – this applies a zero rate of CIL to virtually all types of affordable housing. The Regulations are prescriptive when setting out what constitutes ‘qualifying dwellings’ – for example, with shared ownership units, the percentage of value paid is not to exceed 75% and rent paid on the remainder is not to exceed more than 3% of the value of the unsold element, and rent is not to increase by more than 0.5% over RPI and intermediate rent units are not to be let at more than 80% of market value.
- The Regulations set out circumstances when SHR will lapse, when the development ceases to be eligible for SHR or when SHR is to be withdrawn.
- Exceptional Circumstances Relief (ECR) – allows for CIL to be reduced (by up to 100%) in circumstances where it can be demonstrated that the cost of complying with an existing planning obligation would be greater than the CIL payable and would have an unacceptable impact on the economic viability of the development. The evidential threshold for securing such relief will be high.
- Again, the Regulations set out when a claim will lapse or when eligibility to claim ceases, the latter includes if other relief, such as SHR is granted or if development does not commence within 12 months of the decision to grant relief is made. In London, the relief may be applied by both the relevant London borough and the Mayor.
- Payment periods and instalments – the Regulations include increased payment periods and allow for payment in instalments in certain circumstances.
- The maximum number of instalments for payment is four instalments at 60, 120, 180 and 240 days from the intended date of commencement of development. This only applies if the chargeable amount is £40,000 or more. Lesser sums attract incrementally less instalments, with chargeable amounts of under £10,000 to be paid in full at the 60 day mark (this was previously 28 days).
- It should be noted that if outline permission is granted which allows for phased development, each phase is a separate chargeable development, such that the instalments will apply to the chargeable amount for each phase.
- Payment in kind – the Regulations include provisions to allow for payment by the transfer of land, rather than money, for all or part of the chargeable amount so long as the chargeable amount payable exceeds £50,000. The land must be used to provide or facilitate infrastructure to support the development of the charging authority’s area. The provision of completed infrastructure will not constitute a ‘payment in kind’.
- CIL calculation on net increase in floorspace – the basis for calculating the chargeable amount has changed in the Regulations from that proposed in the consultation draft document, in that now the gross internal floor area of any existing buildings which are on the land in lawful use (excluding buildings where people do not usually go or those which people only access to maintain or inspect machinery) are to be deducted from the gross internal area calculations for the proposed development, such that only any true (or net) increase in development on the land is to be subject to CIL calculation.
- Limitations on the use of planning obligations – whilst the CIL system is said to be voluntary and a discretionary charge in the Impact Assessment documentation published with the Regulations, it is clear that the provisions of Part 11 of the Regulations will make it difficult for authorities to maintain the existing planning obligation (or Section 106 agreement) system.
- Regulation 122 states that a planning obligation will only constitute a reason to grant planning permission if it is necessary to make the development acceptable in planning terms, it is directly related to the development and fairly and reasonable related in scale and kind to the development. This legal test (which reflects the existing policy position) will have general application for determinations made on or after 6 April 2010.
Conclusions
Whilst the changes that have been made between the consultation draft and the final form regulations are to be broadly welcomed, there are a number of matters that will continue to create uncertainty for the property industry.
In particular, there is no certainty in relation to the timely delivery of infrastructure funded by the CIL regime. Those promoting development projects will be concerned to understand when the ‘necessary’ infrastructure, funded by CIL payments, will be in place.
Under the Section 106 planning obligation regime, there was the ability for developers to require that infrastructure be delivered within an agreed time period, failing which the relevant financial contribution would be returned; a mechanism absent from the CIL regime.
There are also concerns in relation to the apportionment of CIL between the different Use Classes.
Also of concern, is the limitation placed upon the ‘payment in kind’ mechanism. This is limited to the value of land transferred to facilitate the provision of infrastructure. A preferable approach would have been to allow for developers to deliver social and physical infrastructure as part of their proposals (thereby achieving economies of scale) and for that infrastructure to be counted against the CIL liability.
It will be important for the related guidance (which will emerge shortly) to deal with outstanding issues, in particular, the timely delivery of infrastructure, funded through the CIL regime.
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Iain Gilbey
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T: 03700 86 4110
I: +44 (0)121 625 4110
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