Friday, 19 October 2012

Changes to the Community Infrastructure Levy (CIL)

The Government yesterday laid before Parliament important amendments to the Community Infrastructure Levy.  The Community Infrastructure Levy (Amendment) Regulations 2012 make a series of long awaited changes to the regime to correct a series of unintended consequences.  Likely to be broadly welcomed by the industry, they are, in summary, as follows.

Most significant are changes to the rules for applications made under section 73 of the 1990 Town and Country Planning Act.  Section 73 provides, in effect, for amendments to conditions attached to existing planning permissions, although the result of a successful section 73 application is an entirely new permission.  Under the Regulations as currently drafted, such a consent is treated just like any other planning permission, attracting its own CIL liability.  This means not only that CIL could be paid twice in relation to the same scheme, but in addition that a scheme for which permission was granted before the adoption of a charging schedule by the relevant LPA could, upon amendment under section 73, attract full CIL liability.  These two highly undesirable outcomes are addressed by a series of proposed changes, a summary of which is set out below.
  • Where, following a section 73 application, the resulting permission would be subject to the same CIL liability as the original consent, the chargeable development for the purposes of CIL is the original scheme as if that scheme were commenced.  So there is no additional sum to pay.
  • Where the result of a section 73 consent is a different CIL liability, the chargeable development is the scheme that the developer is currently operating under (i.e. either the original permission or the section 73 consent).
  • Where a section 73 application results in a new chargeable development but CIL has already been paid in relation to the original scheme, the sum already paid may be set off against any new liability.  There is also provision for the repayment of CIL where the new liability is less than the sum already paid.
  • Where a section 73 application results in a new chargeable development in circumstances where the original permission was granted before CIL came into effect, CIL will be payable only if the new development attracts greater CIL liability than the original permission would have attracted.  In such a case the amount of CIL payable will be the difference between the two consents.  Developers should note that there will be no set-off for existing section 106 agreements; this is accordingly an issue to address within the context of the section 73 application.
  • Note that CIL will not be payable at all in relation to a consent granted pursuant to an application to extend the life of a permission under regulation 18 of the Development Management Procedure Order.  In such cases the CIL regime does not apply.  Since the recent extension, by one year, of the period within which such applications may be made, this point carries added importance.
             There are other changes too.  These include the following:
  • There is provision to correct an error in the formula for the calculation of CIL liability in relation to schemes involving the retention of some buildings and the demolition of others.
  • Similarly, other changes will ensure that social housing relief cannot be granted, contrary to the intention of Government, where retained housing is to be used for social housing.
  • There are measures to ensure that planning permission granted under a Neighbourhood Development Order will attract CIL liability.
  • Finally, the Regulations make provision for payment by instalments where CIL is charged by the Mayor but not the relevant London Borough.

These changes will be received with some relief by the industry.  The section 73  issue has been a matter of very real concern, and has been holding up progress on applications where CIL is an issue. 

Quite aside from concerns relating to the philosophy surrounding CIL, other technical issues remain unanswered.  The industry continues to lobby, for example, for a rethink on the rules on vacant buildings.  The current approach fails to acknowledge the difficulties and timescales involved in site assembly, and is damaging to the delivery of schemes.  More fundamental are concerns that CIL is being set by some LPAs at a level that significantly undermines viability.  It remains to be seen whether the Government will treat such threats to economic growth with the seriousness they deserve.
Finally, an interesting question arises in relation to the so-called 'slot-in' application – i.e. a stand-alone application necessary to amend part of an existing permission because the changes in question go beyond the scope of section 73.  It has been suggested by some commentators that in such cases there will be no additional CIL liability.  This is misconceived; in fact slot-in applications will be treated as granting development for separate chargeable developments liable for CIL in their own right.
It is to be hoped that the Community Infrastructure Levy (Amendment) Regulations 2012 will take effect as soon as possible, and in any event by the end of November

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