Hoping For A Quiet Summer? - Consultation On Mayoral CIL2

Sadiq Khan Slips Out A Consultation On Mayoral CIL2 To Help Fund Crossrail2 Whilst London Is On Summer Break…

CrossRail

© Crossrail Ltd

On 26 June 2017 Mayor of London, Sadiq Khan, published the Preliminary Draft Charging Schedule (PDCS) for a new version of Mayoral CIL (Community Infrastructure Levy), to be known as  MCIL2.  Depending upon the outcome of the consultation, MCIL2 is expected to hit residential, office, retail and hotel projects across Greater London, impacting development in each of the Local Planning Authorities (LPAs) – across the London Boroughs and Mayoral Development Corporations. 

The London Mayor’s current Community Infrastructure Levy (MCIL1) was introduced in 2012 to help finance Crossrail, the major new rail link that will connect central London to Reading and Heathrow in the West; and Shenfield and Abbey Wood in the East.  Crossrail is due to open fully by December 2019 (with progressive phases adopted from June 2017 up until then).

The new proposal is that MCIL2 will be levied from April 2019, superseding MCIL1 and with the specific aim of funding Crossrail2, which is intended to transform ‘North-South’ journey times and connectivity between London and the South East – Epsom, Shepperton, Hampton Court and Chesington.  Crossrail2 is also aimed at supporting growth through the development of 200,000 new homes and 200,000 new jobs along the line of the route.

The new proposed MCIL rates are set out in the consultation which closes on Monday 07 August 2017 at 6pm.  Someone more cynical may consider that the timing of a consultation between ‘End of June and Early August’ was intended to slip ‘under the radar’ of many who might be affected in order to mute any dissenting voices. 

The Mayor is proposing that the changes take effect from April 2019 and are expanded to include hotel, office and retail projects, in addition to the residential projects already subject to charge under the current MCIL1.  Rates are expected to rise sharply across the board, although the effect of indexation will mean that Band 3 areas may see a slight fall in the adjusted rate. 

The most dramatic changes suggested are those for the London Boroughs of Enfield and Waltham Forest; where base CIL rate is proposed to jump from £20/m² to £60/m² - a 200% increase!  These two LPAs suffer the ‘double whammy’ effect of both a band upgrade and the increased CIL rate.

Furthermore MCIL2 will expand the scope of CIL; such that office developments will pay £185/m² in Central London and the Isle of Dogs, whilst hotel and retail developments will be subject to a charge of £140/m² and £165/m² respectively, again in these discrete areas of London.

Back in February, the Government released their Housing Review and mooted ideas for a revamped CIL morphing into a Local Infrastructure Tariff (LIT) and applied at significantly lower rates but across a wider range of projects (and without the currrent range of exemptions).  The CIL review suggested that LIT might be in place by 2019/2020; although that was prior to the recent General Election – which may now delay the implementation of the wider CIL changes.  Indeed, these proposals from the London Mayor suggest a significant lack of confidence in the original timetable for CIL reform.

Alun Oliver, Managing Director at E3 Consulting, said "We still see too many enquiries from developers and owners seemingly oblivious to the fact that their projects are liable to CIL and MCIL.  These increases to MCIL will undoubtedly further pressurise project viability and delivery of housing targets across London whilst also increasing the cost of office, hotel and retail schemes within the Central London and Docklands zones."

As the future changes to CIL/LIT remain uncertain, these proposals to MCIL highlight the potentially very large liabilities which could arise on projects across London.  Therefore it is vital that developers and owners follow the correct procedures and make use of the available options to mitigate or achieve any exemptions that may be applicable to your projects.  Just to illustrate – if Canary Wharf Tower (One Canada Square) were to have been built under MCIL2 the MCIL liability would be £20.54m!

E³ Consulting has been advising on CIL compliance and reduction strategies for nearly 3 years and has helped a wide range of property developers and owners across the England and Wales reduce their CIL costs.  These reductions have been achieved by challenging and ultimately revising the LPAs assessment of CIL to include ‘in-use’ buildings and optimising the allowable ‘offset’ against the floor area of the new dwellings as well as self-build exemptions for annexes, extensions and dwellings as applicable to the specific project circumstances.

Don’t forget to submit any feedback to the London Mayor by the 7th August.  If you feel that any of these issues will potentially affect you, your projects and/or your clients, or wish to discuss any other property tax matters, please contact the team at E3 Consulting.

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