Guidance on the Community Infrastructure Levy was added to this website on 12 June 2014. This replaced the standalone guidance that was published in February 2014. Read more about the changes to the guidance.
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What relief is available for social housing?
Social housing relief is a mandatory discount that will benefit most social rent, affordable rent, intermediate rent provided by a local authority of Private Registered Provider, and shared ownership dwellings. Regulation 49 defines where social housing relief applies.
A collecting authority must give full relief from the levy on the portions of the chargeable development which are intended for social housing (in line with Regulation 50, as amended by the 2014 Regulations). To qualify for social housing relief, the claimant must own a material interest (defined in Regulation 4(2)) in the relevant land (the area granted planning permission) and have assumed liability to pay the levy for the whole chargeable development.
A charging authority may offer further, discretionary, relief for affordable housing types which do not meet the criteria required for mandatory social housing relief and are not regulated through the National Rent Regime.
When applying for relief, a claimant must provide evidence that the chargeable development qualifies for social housing relief. The Regulations provide that dwellings no longer meeting these requirements must pay the levy.
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What is discretionary relief for social housing?
If a charging authority wishes to offer discretionary social housing relief, it must set out what is required to qualify for this relief, including the criteria governing who is eligible to occupy the homes and how these will be allocated. Discretionary social housing relief will apply to affordable dwellings which meet the criteria set out in Regulation 49A (inserted by the 2014 Regulations). Anyone can provide these homes, as long as measures are in place to ensure that the homes, if sold, will continue to be affordable for future purchasers at a maximum of 80% of market price.
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What is the procedure for claiming mandatory or discretionary social housing relief?
The levy collecting authority handles claims for social housing and discretionary social housing relief. In most cases (except in London), the collecting authority and the charging authority are the same.
A claimant wishing to apply for social housing relief should use this form. To qualify for relief, the claimant must be an owner of a material interest in the relevant land (defined by Regulation 4(2)) and have assumed liability to pay the levy on the chargeable development. The claimant must provide a map showing where on the chargeable development the social housing will be built, and a ‘relief assessment’ which is part of the form.
Social housing relief is calculated according to three formulae in Regulation 50 (as amended by the 2014 Regulations). The ‘index’ referred to in Regulation 50(5) is the national All-in Tender Price Index published by the Building Cost Information Service of the Royal Institution of Chartered Surveyors. The figure for a given year is the figure for 1 November of the preceding year. In the event that the index ceases to be published, the Retail Prices Index must be used instead.
When it determines a claim for relief, the collecting authority must write to the claimant setting out its decision, the reasons for it, and the amount of relief granted.
A party claiming social housing relief must submit a commencement notice to the charging authority for a development that is granted relief. The date of commencement determines when the seven-year clawback period expires. If development begins without a commencement notice, the claimant is no longer eligible for social housing relief and the full charge plus any surcharge is immediately payable.
A claim for relief will also lapse if development commences before the collecting authority has notified the claimant of its decision.
Can mandatory or discretionary social housing relief be claimed for communal areas?
The 2014 Regulations provide relief for communal areas that are associated with social housing developments. Regulation 49C sets out the formula for calculating this.
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How is the beneficiary identified when disposing of land?
The effective enforcement of social housing relief – which applies to social housing and discretionary social housing relief – relies on identifying the beneficiary or beneficiaries of that relief.
The initial beneficiary of all social housing relief on a chargeable development is the party who submitted the claim – regardless of whether he or she owns some or all of the land on which the social housing will be built. However, the relief attached to each qualifying dwelling is transferred if the land on which they sit, or will sit, is sold before they are ready for occupation. The relief for those dwellings is calculated and transferred from the old to the new beneficiary under Regulation 52, as amended by the 2014 Regulations.
The seller must notify the collecting authority in writing of the sale, copying this to the buyer and the previous beneficiary of relief for those dwellings (if this is not the seller). As the claimant may only own one of the material interests in the relevant land, the seller of the land might not be the current beneficiary of relief. He or she will in most cases know about the social housing relief attached to that land, however, through the liability notice.
The notification must give details of:
- the gross internal area of the qualifying dwellings that will be situated on the land being sold
- the location of those dwellings through a map or plan and
- the name and address of the seller, the buyer and the former beneficiary of relief from those dwellings (if not the seller)
The new owner’s relief is then calculated, as is the revised relief (if any) of the former beneficiary. Under Regulation 54, a collecting authority may serve an information notice on the claimant to enable it to calculate this. After calculating the revised relief, the collecting authority must issue an updated liability notice that identifies all social housing relief beneficiaries and what relief they benefit from. The charging authority can choose to include within the liability notice a map demonstrating where the beneficiaries’ qualifying dwellings sit within the chargeable development.
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What happens if the social housing no longer qualifies for relief?
Social housing relief can be withdrawn for any qualifying dwelling if a disqualifying event occurs up to seven years from the commencement of development (known as the “clawback period”). The relief for that dwelling must be repaid by the beneficiary. The occupant of the dwelling will never pay clawback – liability falls on the owner of the land immediately prior to the dwelling being made available for occupation.
If a disqualifying event occurs before the commencement of development, social housing relief will cease to apply.
A disqualifying event is any change to a qualifying dwelling causing it to no longer qualify for social housing relief – Regulation 53, as amended by the 2014 Regulations, provides further details. The sale of a qualifying dwelling is not a disqualifying event if the proceeds of sale are spent on another dwelling that qualifies for the relief. Transferring the sale proceeds to the Secretary of State, the Welsh Ministers, a local housing authority or the Homes and Communities Agency are also not disqualifying events. Disqualifying events do not include the purchase of social housing by the Welsh Ministers or the Regulator of Social Housing.
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Does state aid apply to social housing relief?
The UK Government considers that the provision of social housing is a Service of a General Economic Interest. Relief from the levy for social housing has been designed so that it complies with the requirements of the EU Block Exemption for Services of a General Economic Interest. Charging and collecting authorities will need to be aware of this block exemption when implementing these regulations. View more information on state aid.
The European Commission recognises the importance of State support for social housing, which is deemed to be ‘a service of general economic interest’ meaning that relief from a tax or levy can be granted without breaching the State aid rules. However, to fit within the exemption, any housing benefiting from the State aid (relief) must meet three criteria:
- Entrustment – there must be legislative provision, a contract or other legally binding method to ensure that the housing is used in a certain way;
- The housing must be for those people whose needs are not met by the market – “disadvantaged citizens or socially less advantaged groups, who due to solvency constraints are unable to obtain housing at market conditions”; and
- The total aid must not exceed the cost of providing the social housing.
Local policies granting discretionary social housing relief need to comply with the European Commission criteria set out above.
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When does the default of liability for social housing relief apply?
Where a party assuming liability for the levy fails to pay the full amount that is owed, the collecting authority may transfer the liability to the owners of the relevant land within the chargeable development. This is known as ‘default of liability’ – see Regulation 36 for details. A collecting authority may only transfer the liability after it has taken all reasonable efforts to recover the outstanding amount.
Where the outstanding amount is defaulted, it will be apportioned between the owners of the relevant land according to their material interest in the relevant land (defined in Regulation 4(2)). A person or organisation building or owning social housing within the development will still be required to pay a share of the amount based on its material interest in the land. In order to manage the risk of a default of liability by another party, social housing providers should carefully select development partners and make appropriate contractual arrangements to safeguard their interests.