Changes on 1 September 2019 to the CIL Regulations
Vicky McDonald, Associate in our real estate team, brings your attention to sensible improvements to Community Infrastructure Levy (CIL) that are set to come into effect shortly, that will provide some help to developers in addressing the homes shortage.
Following the introduction of the Community Infrastructure Levy pursuant to the Community Infrastructure Levy Regulations 2010, anyone looking to develop land is potentially liable to pay Community Infrastructure Levy (“CIL”), being a contribution towards infrastructure projects in the relevant local authority area.
Changes are being introduced, as the Government has recognised that the current system of CIL is complex and uncertain and has potentially been a barrier to the delivery of housing, something that the Government is keen to remove. The legislation is intended to take effect from 1 September 2019.
The key changes proposed by the amendment regulations, which are to apply only in England are:
(1) Removal of ‘pooling’ restrictions
The ‘pooling’ mechanism was introduced to encourage the adoption of CIL by local authorities, by restricting the number of contributions from section 106 agreements to just 5 per infrastructure project or type. However, it has been seen to be a barrier to development, because some applications were refused when the limit on the number of pooled contributions had already been met.
With the removal of this requirement, local planning authorities will again be permitted to collect more than five contributions to fund the same infrastructure, by using s.106 planning agreements. Whilst this sounds like developers will be at risk of paying for the same infrastructure twice (through both s.106 obligations and CIL), it is important to note that the tests in Regulation 122 will continue to apply, and so the s.106 agreement will still need to be (a) necessary to make the development acceptable in planning terms, (b) directly related to the development, and (c) fairly and reasonably related in scale and kind to the development.
(2) Limits on Monitoring Fees
These are now being given a statutory footing and so they will now be subject to a test of ‘reasonableness’ relevant to the scale and type of development.
Further, any fees must not “exceed the authority’s estimate of its costs of monitoring the development over the lifetime of the planning obligations which relate to that development”.
(3) Surcharge for failure to serve a Commencement Notice replaces denial of exemption
Whilst under the current regulations, if a developer claims an exemption to reduce or remove any CIL liability, failure to serve a commencement notice on the local planning authority before the day on which the development is commenced would result in the developer losing the benefit of any such exemption.
To simplify the process, a failure to serve a commencement notice will no longer result in the loss of the exemption. Instead a surcharge will be imposed. This surcharge is anticipated to be 20% of the notional chargeable amount or £2,500, whichever is lower.
Developers should please note that these changes are not yet in effect and so until in force, commencement notices should continue to be served to ensure that the benefit of any exemptions claimed are not lost.
In addition, commencement notices will no longer be required where the exemption is being sought for residential extensions.