In response to the spread of coronavirus (COVID-19), MHCLG has published guidance for local authorities on Community Infrastructure Levy matters.
Existing flexibilities - overview
The Community Infrastructure Levy Regulations 2010 (as amended) provide some flexibility for local authorities to defer the payment of CIL. We have set out below some of the steps that local authorities may wish to consider now to ease the burden on developers. However, under the current regulatory regime, delaying payment would result, in some cases, in mandatory interest charges for the late payment of CIL.
The government has put in place a number of financial measures to help businesses during the COVID-19 outbreak which are explained on the financial support for businesses pages. However, it is recognised that smaller developers may need more help. To address this, the government proposes to amend the CIL regulations in due course to give authorities more discretion to defer payment for small and medium sized developers without having to impose additional costs on them. This is explained below.
CIL charging authorities have the power under regulation 69B to allow those liable to CIL to pay the charge in one or more instalments and can set the date(s) on which each payment is due. In the absence of such a policy, CIL is payable - in full - at the end of the period of 60 days beginning with the intended commencement date (see regulation 70(7)).
CIL charging authorities can bring into effect a new instalment policy at any time. However, any new instalment policy will only apply to chargeable developments commencing after the new instalment policy comes into effect. CIL is therefore payable in accordance with the instalment policy that was in place at the time of commencement of the chargeable development.
For phased development, as each phase is a separate chargeable development, later phases that have not yet commenced could be subject to a new instalment policy. CIL charging authorities could therefore take advantage of this provision to introduce new instalment policies for as-yet uncommenced chargeable development.
CIL collecting authorities have more discretion around how they deal with the late payment of CIL. This could provide some scope to ease the financial pressures on developers.
In normal circumstances, a CIL collecting authority might consider it expedient to stop development until the outstanding amount has been paid. The regulations set out the procedure for issuing a CIL stop notice, contravention of which is an offence. However, decisions regarding whether and when to take such enforcement actions are at the discretion of the collecting authority.
Similarly, a CIL collecting authority has the ability under regulation 85 to impose surcharges on a person that has not paid CIL. However, the imposition of these surcharges is at the discretion of the authority. CIL collecting authorities can therefore choose not to impose the surcharge for late payment and are encouraged to consider using this discretion where appropriate.
However, the regulations provide that late payment interest accrues automatically, starting from the day after the day payment was due (see regulation 87). The payment is calculated at an annual rate of 2.5% above the Bank of England base rate. Authorities have no discretion to ‘disapply’ the accrual of interest. Therefore, in addition to the measures introduced to help businesses as a whole, the government proposes to help small and medium sized developers further.
The government will introduce amendments to the Community Infrastructure Levy Regulations 2010 to enable charging authorities to defer payments, to temporarily disapply late payment interest and to provide a discretion to return interest already charged where they consider it appropriate to do so for developers that have an annual turnover of less than £45 million. This may include interest that has accrued in the period between the introduction of the lockdown and the regulatory changes coming into effect. It is intended that these easements will not be open-ended and will be removed when the economic situation has recovered.
CIL regulations are subject to an affirmative resolution procedure, which requires debate in Parliament. However, existing flexibilities and the government’s clear intention to legislate should give authorities confidence to use their enforcement powers with discretion and provide some comfort to developers that, where appropriate, they will not be charged extra for matters that were outside of their control.
Until such amendment regulations are able to take effect:
CIL charging authorities are encouraged to consider making use of the ability to introduce an instalment policy (or amend an existing instalment policy); and
noting the government’s clear intention to introduce legislation to permit deferral of CIL payments and disapply late payment interest for SMEs, CIL collecting authorities are encouraged to use their discretion in considering what, if any, enforcement action is appropriate in respect of unpaid CIL liabilities; and
CIL authorities should take a positive approach to their engagement with SME developers, to ensure CIL liabilities do not cause undue burdens over the period of disruption caused by the coronavirus
CIL authorities should note the existing flexibilities they have around enforcing CIL for larger developers, including flexibilities over the imposition of surcharges. Late payment interest will remain mandatory where such flexibilities are used
There are greater flexibilities within section 106 planning obligations than CIL. Where the delivery of a planning obligation, such as a financial contribution, is triggered during this period, local authorities are encouraged to consider whether it would be appropriate to allow the developer to defer delivery.
Deferral periods could be time-limited, or linked to the government’s wider legislative approach and the lifting of CIL easements (although in this case we would encourage the use of a back-stop date). Deeds of variation can be used to agree these changes. Local authorities should take a pragmatic and proportionate approach to the enforcement of section 106 planning obligations during this period. This should help remove barriers for developers and minimise the stalling of sites.