Introduction
The Community Infrastructure Levy has never been short of critics, nor complications. It briefly looked as though its time was up, with the proposed new Infrastructure Levy, promising a cleaner, simpler system. However, the IL was scrapped when the current government came to power, CIL survived and it remains firmly embedded in the planning landscape. Understanding and navigating the CIL regime competently is therefore an essential skill for planning and property practitioners. As such, we will set out a series of articles looking at the basics of CIL, recent appeal cases, pitfalls and how to avoid them.
Read the first article of our series here: Calculating CIL – Floorspace Deduction.
CIL and Prior Approval
Having previously examined the floorspace deduction in general application, we now consider it in the context of prior approvals under permitted development rights, particularly changes of use. It is often assumed that changes of use will not attract CIL liability as no additional floor space is being created. However, the starting point is that a change of use is CIL liable, but potentially subject to deductions allowing offset of that liability. The 'floorspace deduction' allows the floor space of certain existing buildings which are 'in use' to be deducted from the GIA of chargeable development to arrive at a net CIL chargeable area (para 1(6) of Sch 1 of the CIL Regs). For a building to be an 'in-use building', it must contain a part that has been in lawful use for a continuous period of at least six months within the three-year period ending on the day planning permission first permits the chargeable development. If the building qualifies, CIL liability may be reduced to zero.
Whilst our previous article examined the concept of an 'in use building', we now focus on the phrase 'the day planning permission first permits the chargeable development' as referred to in para 1(10) of Sch 1 (the in-use building definition). For a standard full planning permission, this will usually be the date of grant. However, developers with the benefit of a prior approval for change of use must be alert. A prior approval is a form of 'general consent' for CIL purposes, being a planning permission granted by a development order made under section 59 of TCPA 1990. In the case of a general consent, the date on which planning permission first permits development will not be the date of issue of the prior approval decision notice, but rather 'on the day on which the collecting authority receives a notice of chargeable development submitted to it in accordance with regulation 64 in respect of that development' (Reg 8(7)). If no notice is submitted, the date will be the day on which the last person is served with a notice of chargeable development by the local authority, which can submit the notice itself under Reg 64A(3) when the developer fails to serve the required notice before commencing development. Therefore, to set the date from which the three-year period runs back, a notice under Regulation 64 (Form 5: Notice of Chargeable Development) must be submitted to the Council before any development authorised by a general consent is commenced (Reg 64(2)).
However, Reg 64(1A) provides that this requirement does not apply 'if the chargeable amount, calculated under regulation 40 (now Sch 1), is zero.' Here lies the trap: those unaware of the specific timing rules for prior approvals often take the date of the prior approval notice as the relevant date. If confident that there has been lawful use for at least six months within the preceding three years, they might decide under Regulation 64(2) that no Form 5 is required as CIL would be zero. However, for prior approvals, it is the date of submission of Form 5 that sets the date for the three-year period where the developer is relying on the in-use building deduction. Form 5 should therefore always be submitted as soon as possible following issue of the prior approval consent, even if CIL is likely to be zero, to ensure the crucial date for the three-year period is locked in. Should no Form 5 be submitted and the Council serve one itself, and more than three years have passed since the last six-month period of lawful use, the developer would lose the benefit of the in-use building deduction, with the result that all of the retained floorspace could be treated as CIL chargeable.
This is clearly an unsatisfactory outcome. One might reasonably argue that if CIL liability in accordance with normal floorspace deduction principles was zero at commencement, whether Form 5 was correctly served should not dictate liability. However, if the Council serves the Form 5 notice and the prior approval has not been implemented before expiry of the three-year floorspace deduction period, the risk of the Council claiming the development is CIL liable increases substantially.
For developers and those purchasing property with the benefit of a prior approval consent for change of use, beyond establishing when the property was last in lawful use and for how long, it is crucial to check whether Form 5 has been submitted and how that impacts the three-year floorspace deduction period, to avoid anxiety and potentially costly errors.
There may also be a separate argument in some prior approval cases under the retained-building deduction now found in KR(ii), but that raises a distinct issue which we will consider in the next article.
