Correct as of 2:00pm on 13 May 2020. This article is not being maintained.
Today the government has issued guidance which gives charging authorities some flexibility in how CIL will be charged during the Covid-19 Pandemic.
The new proposals will give charging authorities more discretion to defer payment for small and medium sized developers without charging interest and encourage flexibility when using enforcement powers.
Instalments
The CIL Regs permit charging authorities to adopt an instalment policy which allows developers to spread the cost of CIL over time. If there is no instalment policy, CIL is payable - in full - at the end of the period of 60 days beginning with the intended commencement date. New instalment policies can be issued at any time. Deferring CIL payments may help developers to mitigate the impact of the pandemic on cash flow.
Charging authorities may not always be inclined to introduce new “developer friendly” instalment policies because there are competing demands on their budgets from other departments in the local authority, for example social care. CMS has seen examples around the country where charging authorities have expressed a willingness to defer CIL to support the development industry. The new guidance encourages this approach.
Any new instalment policy will only apply to developments commencing after the new policy comes into effect. CIL is payable in accordance with the instalment policy that was in place at the time of commencement of development. If a developer has an unphased planning permission it cannot benefit from changes to an instalment policy that occur after it has started work on the development. If a development is phased, each phase is a separate chargeable development. Phases that have not yet commenced could benefit from a new instalment policy.
Enforcement
Where CIL has not been paid on time the collecting authority may choose to:
- stop development until the outstanding amount of CIL has been paid; and
- impose surcharges on a person that has not paid CIL.
The new guidance encourages charging authorities to use this discretion where appropriate. This may be a helpful tool for developers if a charging authority is reluctant to be flexible with CIL during the Pandemic.
The charging authority does not have discretion regarding late payment interest. This is calculated at an annual rate of 2.5% above the Bank of England base rate. The guidance states that the government will introduce amendments to the CIL Regs 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. This “relief” will cease when the pandemic has ended.
Larger developers who choose to defer their CIL payments, will continue to be charged late payment interest at an annual rate of 2.5% above the Bank of England base rate.
Section 106
The guidance also comments on section 106 obligations. If the delivery of an obligation is triggered during the pandemic, authorities are encouraged to consider whether it would be appropriate to allow the developer to defer delivery. Deferral periods should be time limited or linked to a future event e.g. resumption of CIL late payment interest for SMEs. The guidance suggests that deeds of variation can be used to agree these changes. It may be a useful lever to encourage local authorities to engage with a deed of variation where a developer is experiencing difficulties due to the pandemic.
Local authorities are also encouraged to take a pragmatic and proportionate approach to the enforcement of section 106 planning obligations. The purpose of this is to remove barriers for developers and minimise the stalling of sites.
Overall the guidance will be a welcome change for developers, particularly SMEs. It may also assist some local authorities who are keen to ensure that sites do not stall and that the development pipeline continues during the pandemic.
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