The DCLG has given local planning authorities an extra 12 months to implement charging regimes under the new development tax, writes Matthew Spilsbury.
The Department for Communities & Local Government published its response to the consultation on further Regulatory Reforms to the Community Infrastructure Levy on 25 October. The likely nature of the Government's response to the consultation, conducted over April and May 2013, has been the subject of much conjecture within the property industry.
DCLG listened to industry concerns and the majority of the proposed reforms are being recommended for adoption. Moreover, we are to expect a revised set of CIL Regulations to be laid before Parliament before the year is out, with swift introduction of both Regulations and refreshed CIL Guidance by the end of January 2014. This 'fast tracking' is both welcome and necessary – particularly where Examinations are forthcoming or for those with schemes on the horizon.
Key Proposed Reforms:
Extended Transition Timetable
The timescale for transition to a CIL charging regime will be extended by 12 months. Where a CIL Charging Schedule is not adopted the current system of S106 contributions will continue unrestricted until April 2015. This will provide Local Authorities greater time to adjust to the requirements of the evolving CIL regime as well as prepare and adopt Local Plans.
Moreover, those Local Authorities that had published a Draft Charging Schedule prior to this consultation being opened in April 2013 will be exempt from changes relating to the CIL charge setting process. This will reduce the requirement for further evidence to be prepared, but will mean these Local Authorities may be granted an 'easier ride' through Examination under the current system.
The application of the proposal for an 'evidence-based test' at Examination to ensure Charging Authorities can demonstrate that proposed rates strike an 'appropriate balance' is welcome. This will place greater onus on the Local Authority to prepare and present locally applicable viability evidence, correcting the current imbalance that effectively places this responsibility on objectors.
Examiners will need to be sufficiently skilled in viability issues to ensure that the test is implemented effectively. No details of the test have yet emerged – expected instead within the Regulations or Guidance.
Phased Payments & Payment in Kind
The expansion of the Regulations to enable all planning permissions, both outline and full, to be treated as separate phased and CIL chargeable development is good news. Subject to careful planning strategy, this will have beneficial implications for scheme cash flows where demolition, site preparation and remediation works are necessary. These initial works will be able to commence without triggering a CIL liability for the scheme.
Also welcome is the proposal to extend the scope of the 'payment in kind' provisions to allow developers to pay CIL via provision of on-site and/or off-site infrastructure. In particular, it will provide the industry with greater certainty on the timing of the delivery of necessary infrastructure items, helping to reduce risk. The amount by which CIL liability will be offset will be equal to the actual design and construction costs for infrastructure delivered.
The Government's approach to resolving the implications of EU procurement thresholds does, however, remain left for another day.
Differential Rates – Scale
As anticipated DCLG has confirmed the proposal to allow the charging of differential CIL rates linked to the scale of development will be introduced. However, a bigger development is not automatically more viable, within any use. It is here that the evidence-based test will become critical. Differentiation by scale now adds a further dimension and risks the adoption of Charging Schedules with complex CIL rate levels. Fine-grained evidence to prove size thresholds are justified on clear viability grounds will be a necessity. Examiners will be under greater pressure and scrutiny to carefully consider the viability implications of CIL rates.
The decision not to introduce a test of 'abandonment' to trigger a vacant building becoming liable for CIL in part avoids the complexities and undoubted arguments over how to define this. However, the decision to extend the current 12 month vacancy period (of which a building must be occupied for six months) to cover a period of three years appears arbitrary. This will only apply to buildings where there is a proposed change of use.
However, the test will no doubt continue to cause issues for the industry in proving lawful occupation.
Will the CIL Regulations of the 2014 vintage trigger reason for celebration within the property industry? I remain unconvinced.
Although the proposals look to deal with a number of the 'big ticket' issues, as we have become all too aware with CIL, it is never straightforward. The amended CIL Regulations and Guidance will make interesting reading and, I'm sure, even more interesting application in 2014.
- Matthew Spilsbury is senior consultant in economic planning at Turley Associates in Manchester.