Summary and implications
The consultation on further reforms to the Community Infrastructure Levy (CIL) closed in May 2013.
The Government has now published its response to the consultation. The Government is proposing to implement the majority of the proposals with some changes, which will be of interest to landowners, developers and public authorities.
The changes
The key changes the Government is proposing to introduce are as follows:
- Deferring the date from which the restrictions on the use of S106 obligations apply to April 2015, which in effect defers the date by which authorities are forced to introduce CIL. (The current date is April 2014.)
- Allowing all types of planning permissions to be treated as phased development to ensure the fair treatment of more complex developments.
- Extending the vacancy test to cover buildings that have been in use for a continuous period of six months in the last three years prior to the grant of planning permission (currently the six-month period is calculated within a 12-month period). The vacancy test is important because, if satisfied, CIL is then not payable on floorspace equivalent to the existing amount on site.
- Related to the above change, is a proposal to change when the three-year period is calculated from (which is known as the date when the permission "first permits the development").
- Where there is no change of use, no increase in floorspace and a building has not been abandoned, development will be exempt from the CIL so as to ensure design changes are allowed.
- Allowing the CIL liability to be paid in whole or in part through the provision of land and/or on-site or off-site infrastructure.
- Requiring authorities to strike an appropriate balance between the funding of infrastructure from the CIL and the potential effects of the CIL on the viability of development (whereas currently they need to only aim to do so).
- Allowing authorities to set differential rates by reference to the proposed size of development, or the proposed number of units or dwellings (whereas currently differential charging is limited to zone and uses).
- Providing greater flexibility in relation to applying discretionary relief for exceptional circumstances by removing the requirement that a S106 obligation must be of greater value than the CIL before the exemption can apply.
- Extending Reg 123 of the CIL Regulations 2010 (excluding Reg 123(3)) to include S278 Highways Agreements so that they cannot be used to fund infrastructure for which the CIL is earmarked. Highway agreements which are drawn up by the Highways Agency, Transport for London or Welsh Ministers, relating to the trunk road network will be exempt. (The exemption has been introduced as a result of the consultation).
The Government is aiming for new regulations and guidance to come into effect to introduce the changes by the end of January 2014.
Our view
The extent of the proposed changes reaffirms our view that the CIL legislation was incoherent. Despite the proposed changes to the regulations we expect that problems will remain and envisage further amendments in the future, which could extend the period of uncertainty for landowners, developers and public authorities who are left to "muddle" through the CIL regime.
A number of the present changes respond to problems encountered in practice in implementing the CIL regime. It is, therefore, not surprising that many of the changes were universally supported in the consultation. Responses were more mixed on a couple of the proposals with a notable division between public authorities and developers (such as in regard to restricting the use of highways agreements and changing the date on which a permission "first permits the development" for the purpose of calculating the CIL set-off for existing floorspace). In both instances, the Government is going ahead with changes (but on the basis of amended proposals).
The change to allow a greater period (three years) over which to establish the six months of lawful use of existing floorspace in order to qualify for the CIL set-off will be welcome, but developers would have preferred revocation of this vacancy test altogether, which has been causing significant problems in practice (such as restricting the ability of landowners and developers to obtain vacant possession of large development sites in good time to enable a development to go ahead without added CIL liability).
The introduction of this change together with the change to the date when a permission "first permits the chargeable development" will require careful treatment in transitional provisions in the amending legislation. Significant hardship could otherwise be caused to landowners and developers who are currently implementing strategies to obtain the CIL set-off based on the current legislation.
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