In Business Cornwall magazine this April we focused heavily on Commercial Property. Foot Anstey‘s James Clark explains more about the Community Infrastructure Levy
Community Infrastructure Levy is coming – Are you ready?
Community Infrastructure Levy (CIL) is essentially a local tax on development that Councils can introduce to fund infrastructure in their area. Cornwall Council is expecting to introduce CIL later this year or in early 2016.
A Council must have an up to date local plan in place before introducing CIL. Cornwall Council submitted its draft local plan for examination on 6 February 2015 and is anticipating adopting the local plan in Autumn this year.
CIL in Cornwall
The introduction of CIL is conditional on the Council’s local plan being found sound at examination later this year. If at examination the Inspector finds the plan to be unsound or recommends that further work is undertaken, such as in relation to the Council’s housing figures, this could significantly delay the introduction of CIL.
CIL in Cornwall will be payable at a rate set by the Council per square metre of new floorspace (no CIL is payable where the new floorspace is less than 100 square metres).
The Council can set different rates for different types of development and may also set different rates in different areas, for instance to encourage regeneration. CIL is also payable on permitted development – i.e. works that can be carried out without the need for planning permission.
In its preliminary draft Charging Schedule, Cornwall Council proposed:
- a CIL charge of up to £100 per square metre for new houses in certain areas – certain areas will attract a £0 charge (e.g. Redruth, Camborne, Helston, Liskeard) as an incentive to development;
- £150 per square metre for supermarkets (except in Truro and Threemilestone where a higher rate of £250 per square metre will apply;
- all other uses would attract no charge.
The average new home has a floorspace of 76 square metres, which under Cornwall Council’s proposed rates could result a charge of up to £7,600 per home. In addition, planning obligations can be required to deal with site-specific issues, such as highway works.
Exemptions & Reliefs
There are various exemptions and reliefs available for CIL, for example on new social housing or for charities where the development will be used wholly or mainly for charitable purposes. Self-build houses, extensions and annexes are also eligible for relief. The relief available for self-build housing is perhaps the most interesting.
A person building their own home, or who has commissioned a contractor to build a home on their behalf, is eligible to claim the relief. The government wants us to build 100,000 self-build homes over the next decade; the exemption from CIL is, alongside other legislative changes, is a means of encouraging new self-build homes in England.
Discretionary reliefs are also available, such as for exceptional circumstances (where the CIL charge would make the development unviable), however, these reliefs must specifically be adopted by the relevant authority. We understand Cornwall Council has not yet decided whether or not to introduce exceptional circumstances relief.
The system for applying for and securing relief from CIL is technical. Failing to submit the right form or notice at the right time can result in the relief being lost; potentially a very expensive mistake.
Floor space that is due to be demolished or will be retained as part of a development, can be deducted from the CIL charge provided it has been in lawful use for at least 6 months in relevant period.
Developers acquiring sites for redevelopment should consider carefully what evidence is available to substantiate the lawful use the site, as the deduction for demolished/retained floor space can be significant.
The only evidence available might be a statement from by the seller of the site; if so this point may need to be dealt with in the contract to acquire the site.
We would recommend obtaining professional advice before starting work to make sure that any reliefs available have properly been secured. Once work starts on site, it is not usually possible to challenge any decision by the Council to refuse a particular relief and any challenge submitted, but not decided will usually lapse.
As mentioned, once CIL comes into force, planning obligations (contained in Section 106 agreements) will continue to be used to deal with any site-specific issues and affordable housing. In the meantime, restrictions on the use of planning obligations come into effect on 6 April 2015.
This means that Cornwall Council will not be able to seek contributions for a specific infrastructure project or type of infrastructure if five or more obligations have already been entered into in respect of that infrastructure project / type of infrastructure.
For example, a new school in Cornwall could be funded by planning obligations. From 6 April, the Council could require up to five obligations to fund that new school, which it could secure by way of planning obligation.
Developers 1, 2, 3, 4 and 5 could all be caught by the requirement to make a contribution. Developer 6 however, could not be required to pay any contributions to that project.
Some commentators have suggested that the new restrictions might result in councils artificially breaking down projects into small elements so that five obligations can be sought for each element. I will be interesting how Cornwall Council approaches the new restrictions.
A planning permission (either full or outline) obtained before CIL is introduced will not be liable to pay CIL, even if the works start after CIL is introduced. If, after CIL is introduced, you apply to vary a planning permission granted before its introduction, CIL will only be payable on any increase in the floor space created by the later application.
If possible, it may well be worthwhile to make your planning application in good time before CIL comes into force.
Particularly as, elsewhere in England, there has been a significant spike in the number of planning applications made to councils immediately before CIL comes into force, a similar spoke should be anticipated in Cornwall with additional delays to planning applications being determined.