Policy Summary - Revised levy proposals pave way for vacancy test revamp

Policy Community Infrastructure Levy: Further Regulatory Reforms

Empty space: discount rules changed
Empty space: discount rules changed

Issued by Department for Communities and Local Government

Issue date 25 October 2013

Background: As part of further amendments to the Community Infrastructure Levy (CIL) Regulations 2010, the Department for Communities and Local Government (DCLG) proposes to amend the rules allowing developers to offset existing usable floorspace against CIL liability when they refurbish or redevelop buildings. Its revised proposals were announced last month in a response to consultation in April this year.

Key points: At a time when the number of local planning authorities with CIL regimes in place was barely into double figures, ministers were already aware that the ground rules for the system risked penalising developers looking to update existing buildings.

Under the current regulations, developers proposing a material change of use can claim a discount on their levy liabilities if the building they seek to refurbish or redevelop has been in continuous lawful use for at least six out of the previous 12 months. The rationale was that the previous use would have imposed some burden on existing local infrastructure, so it would be unfair to expect developers to contribute further.

In this spring's consultation, the DCLG said it was aware that the timescales prescribed for this so-called "vacancy test" meant it was "not working effectively" and was "difficult to enforce". The changes proposed then would effectively have dropped the test, restricting developers' liability to any increase in floorspace resulting from refurbishment or redevelopment.

While developers generally supported removal of the test, many urban local authorities voiced concern about a potentially significant loss of revenue. The government now proposes to retain the vacancy test but extend it so that developers will benefit from the discount if the building has been in use for six months continuously at any time in the previous three years. Schemes that involve no change of use will be exempt from the levy, unless an increase in floorspace is planned or the building has been abandoned.

The DCLG said the move "provides an incentive for bringing empty buildings back into use". It acknowledged that some major regeneration works may take significantly longer than three years. However, it concluded that the extended time limit - combined with other changes on phasing of payments - would offer enough flexibility for the vast majority of large developments.

The DCLG is planning to lay the new regulations before Parliament by the end of the year and will issue new guidance. The reforms are programmed to come into force by the end of January 2014.

To read the consultation responses and government proposals click here.


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