CIL review: A note of caution to charities
The government has published the CIL review team's long-awaited report on how CIL has been working (or not working) to date. The report recommends several changes which aim for a more consistent and fair system. Charities may need to watch out that they do not lose out in the reforms.
It is no exaggeration to say that I have yet to come across anyone who is a fan of CIL, except perhaps those who enjoy the challenge of trying to make the Regulations work in a practical scenario. Many times, a conversation with a colleague has ended with someone exclaiming "but that can't be what it means". It comes as no surprise, therefore, that the recently published CIL Review Team's report quickly dismisses the idea of keeping the system as it is, noting that "The only question is how far such reform should go".
One of the biggest complaints about the existing system is the fiendish calculation formula and regime for offsets and exemptions. It is certainly far from the clear and transparent system that it was intended to be. That said, if the right forms are filled in at the right time, it does offer charities a very welcome blanket exemption from the tax where they are developing their own land for charitable purposes (and in some areas a discretionary exemption for their investment activities too).
The review team propose replacing CIL with LIT – a Local Infrastructure Tariff - with larger schemes also being subject to s106 obligations. The recommendation is that LIT would be a much-streamlined low level tariff which would require even the smallest development to contribute to an area's infrastructure needs. Where there are Combined Authorities, they would be entitled to charge SIT – a Strategic Infrastructure Tariff - akin to the current London Mayoral CIL.
The new tariffs would work as a local- set "per square metre" payment as with CIL, but with some significant changes to the calculation method.
One recommendation is that there will be very few or no exemptions from the requirement to pay. Whilst proposals suggest that rates will be lower than CIL tends to be, this could still impact on the viability of charitable development.
It is also recommended that the new tariff be mandatory across all local authority areas (unlike CIL, which authorities can currently choose whether to implement), and that changes of use are also caught, so the net would be wider than was ever the case with CIL.
That said, there is acceptance that further consideration is needed on how the tariffs could work for non-residential development, and that there may be scope for zero-rated uses. This could assist some charitable development.
Larger sites would have the benefit of being able to negotiate setting the tariff off against a s106 package but for some that may not be the answer, and it certainly leaves scope for confusion and a lack of clarity.The government has promised a response to this report in the Autumn Statement, which leaves some time for stakeholders to make their views known. The door is certainly not shut to a charitable exemption or to zero-rating some types of development, but a strong case may need to be made. The review team hope that the new tariffs could replace CIL entirely by 2020, with a transitional period leading to that date.