Our previous CIL blog highlighted the need for changes to CIL to provide a way through Lockdown and then ensure long term resilience. The Government’s changes will provide some relief for SME builders, if they are willing to lay their finances bare.
Deferral powers
The Government delivered on its 13 May 2020 commitment to flex the CIL system, by laying the further CIL amendment regulations. The changes are necessary because some elements of CIL liability cannot currently be paused or waived, notwithstanding flexible approaches by some collecting authorities (not least late payment interest, which keeps running at 2.5% above base regardless of informal deferral agreements).
The changes will allow collecting authorities time-limited discretionary powers to:
- defer CIL payments for up to 6 months (reg.72A)
- disapply late payment interest and surcharge payments (reg. 72A – again, up to 6 months)
- credit interest already charged to the developer (reg.72B).
Authorities will have 40 days to deal with a deferral request, as soon as practicable – during which the late payment clock stops for interest and surcharge purposes. The determination period is then subtracted from the extension period.
The deferral request must be no more than 14 days before the due date (and ASAP), for liabilities due after the Regulations come into force. The powers provide scope – in theory – to push liability out to mid-February 2022.
Timing
The process for CIL Regulations changes is slow by Covid-19 standards – requiring approval of both houses of Parliament. As such, collecting authorities are now encouraged to:
- consider instalment policies that push the liability for unimplemented schemes (and phases) back en masse;
- generally take a(s) relaxed approach (as their infrastructure funding commitments allow).
Qualifying
Applicants must be:
- SMEs – with a turnover cap of less than £45million (calculated on a similar group+ basis to SME tax reliefs and coronavirus loans;
- “experiencing financial difficulties for reasons connection to the effects of coronavirus” and “having difficulty paying a CIL amount” due between the Regulations coming into force and 31 July 2021;
- able (and willing) to evidence that to the collecting authority’s satisfaction. The collecting authority can also request further information.
Following the Holborn Studios case, there will be an expectation of transparency that the information used in making the decision will be listed and published.
Limitations
Aside from potential creditor interest in SME financial health, there are a few practical hurdles to contend with:
- Deferral can only be requested where a Demand Notice (DN) has been served. There is no minimum period for this to be served. The interaction of the 14 and 40 day periods (and the fact that a DN is only served following actual or notice of intended commencement) appears to require developers to commit to CIL liability with a gamble on whether the authority ultimately grants deferral. If it does not, the option to simply park the scheme has been lost;
- Each instalment will have to be subject to a separate request;
- Authorities will need to be persuaded that:
- the public interest in delaying capital receipts outweighs the public interest in not doing so,
- State Aid is not an issue;
That includes, in London, parallel persuasion of the Mayor.
A Modest Proposal with much to be modest about
So let no-one talk of more far reaching reforms: allowing partial reviews of Charging Schedules to allow more flexibility and resilience to changing patterns of investment; requiring partial reviews of Charging Schedules where affordable housing yield is persistently below the charging authority’s assumed benchmark; allowing more use of Works In Kind …
