Community Infrastructure Levy Relief
One document which does now start to provide additional detail on CIL is the Community Infrastructure Levy Relief: Information Document (DCLG May 2011) – this is a MUST READ for every developer, although be warned, you will need your lawyer, accountant and tax advisor to guide you through. The document sets out the circumstances by which relief will be granted to CIL.
There are 3 main strands of relief, those for Charities, those where Social Housing is provided, and Exceptional Circumstances.
Charitable Relief is largely self explanatory (even if the process isn’t), there are two types of relief, mandatory and discretionary. The key point here is that authorities will only be able to offer discretionary relief to charities, where they have an adopted policy already in place stating that they may do so, they can’t apply a discretionary relief to your charity just because they accept your circumstances when an application is made. The policy must already be there. If you are a charity – start your lobbying now.
Social Housing – where a development makes provision for social housing then that development may be capable of claiming relief. There is a simple (sic) formula proposed to help calculate the relief, such as;
“The first formula uses the rate of the levy (R) multiplied by NR (where N is the deemed net area of the part of the chargeable development which will be qualifying dwellings, and R is each rate of the levy applying to the chargeable development ) and by the index for the year of planning permission (IP). This figure is then divided by the index for the year the charging schedule took effect (IC). The value of the charge for qualifying dwellings at each rate of the levy is calculated and totalled to determine the relief. What remains to be paid is calculated by subtracting the total relief from the total charge for the levy had there been no relief” (para 50)
But watch the small print, there are a number of caveats about the transfer of relief between new and previous owners of a site, and a few little traps just waiting for the unsuspecting: firstly, claims for relief will lapse if development commences on a chargeable development before the collating authority has notified the claimant of its decision, and secondly, benefit can be withdrawn up to seven years from commencement of development if a disqualifying event occurs.
So what does this mean in practice – well, there will need to be a new army of property and economically literate staff employed by local authorities. Developers should expect to be asked to fund ‘independent viability assessments of schemes’. But if you can’t start development until you have received your relief notification – expect delays in your start date (recent experience with a West Midlands authority has been a delay of 5 months at a fee of £2,000+ for the District Valuer to reach a view on a submitted appraisal). Finally having achieved your development, sold the site on, you subsequently learn that one or more of your social houses were actually released as market houses 6 years later – well expect to receive an invoice for the money you thought you had obtained relief on. Or perhaps even more surprising, if a previous owner held the liability, but they can not be found or refuse to pay, provided the collating authority have used all reasonable endeavours, then they can come and claim CIL liabilities from you, as the current owner. Caveat Emptor indeed!
But the real question is this – which schemes currently being promoted, where there are clear planning gain schedules in place, pay the full existing S106 policy level of contribution (indeed, do any)? In many many cases, the developer will rightly argue that a myriad of potential development costs, site circumstances, existing use value etc, make compliance with blanket tariff’s uneconomic. So the real question (and this article does not even touch on the complexities of how the guidance deals with changing ownerships), is how does CIL add the certainty expected by Government, given that inevitably there will be legion applications for relief under the exceptional circumstances banner, all requiring detailed and independent assessment of viability? There is no guidance given incidentally as to how a ‘delay’ in the grant of relief might relate to the date of permission.
Oh, and one last trap door – if you circumnavigate the new bureaucracy, and finally achieve your certificate of relief, that benefit will cease to apply if you don’t commence development within 12 months...