CIL implications

[Deejay_2]

We have completed our plans for submission to Planning and have decided to reconsider the layout of the buildings for various reasons.  The development involves the demolition of a 1970's bungalow and replacing this with a new build house and triple garage with granny annexe over - all set out in a straight line.    We now think that for financial reasons as much as anything we should do the development in two stages ie build the triple garage with flat above first - now at the far end of the garden which separates it from the new house, and then demolish the bungalow and replace it with the new house later when we know where we are financially.   My questions are:

1   Should we just submit the garage/flat plan initially - the garage and flat m2 will add up to 126 m2 - then if we deduct the floor area of our current detached garage which will be demolished ie 28 m2, this leaves less than the 100 m2 extra floor area allowed for CIL.  Will we still have to complete the liability form and seek exemption. 

2   When we have established further funds, we then submit further application for demolition of bungalow and construction of replacement house. This will bring us well into the CIL zone, so we would expect to complete required forms and apply for exemption.   

OR 

3  Should we submit the whole development on one planning application but ask that it is done in two phases.  If they agree, would this mean the CIL would not kick in until the main house is started.  Presumably if we build the triple garage, this will mean the development has commenced and we will serve the requisite notice, but I'm not sure where this leaves us with the main house and CIL.

Doing the development in two stages works out much better for us - we can keep our current mortgage, less neighbour/Parish Council objections because the layout we have now decided on is much more acceptable, and it gives us breathing space.  We feel two applications would probably be better but wondered whether anyone could advise one way or the other.   Many thanks.

[Temp]

Are you going to live in this house? In which case you shouldn't have to pay the CIL as you can claim the exemption for self builders.

 

 

 

 

[Temp]

In general its normally best to apply for planning for everything you want to do at the outset. Not least as this maximises how much can be zero rated for VAT.

[newhome]

I think that doing it in 2 stages may complicate the CIL position. If you are planning to live in the house for at least 36 months post completion I would do the whole planning app in 1 go and then immediately apply for the self builder CIL exemption. If you apply for the exemption for the annex I’m not sure where that leaves you in terms of then applying for an exemption for the main house too given that it’s all the same title. On the annex front are you prepared to pay council tax on this too because 2 self contained units will attract 2 lots of council tax? 

[Deejay_2]

Thank you for your replies - I have been giving this further thought.  We already have draft plans drawn up for a 4 bedroomed house with a triple garage with granny flat above, with an additional 4.5 metre single storey building required to meet the 25 degree rule.   So in a straight line from the entrance this goes : 4.5 m single storey, 11.5 m triple garage with flat over, 1 m link attaching garage to 12 m x 12 m house, followed by garden.  We are in a conservation area and know Planning will request that we alter the plans to make things less "bulky" which is why I was thinking it might be an idea to separate the triple garage and put it at the bottom of the garden, which is lower and therefore less visible.  But then this would entail moving the main house into the space the garage has vacated which would be much nearer to the neighbour and infringe the 21 m requirement between habitable rooms.  At that point I wondered whether it was worth bothering - there's seems to always be a rule or regulation to obstruct us.  Then I suddenly had a light bulb moment as our current 3 bed bungalow is allowed to be exactly in this nearer position, so why knock it down.  We would probably struggle financially to do the original idea but this one we could manage  ie build the triple garage at the bottom of the garden, move into the granny flat above it, and then remodel the bungalow whilst it is empty.  We can apply for the exemption and as long as we start the development, then we won't have to re-apply to planning ever again.  We intend staying in the property long term (well, shorter term for me of course).   The bungalow lends itself perfectly to remodelling so why didn't I think of it before.  The ground floor is the same meterage as the proposed house, and we would put bedrooms in the roof, hopefully without having to raise it.   Also with the repositioning of the buildings we won't need to have the additional 4.5 m single storey building we didn't want.  The footings on the house we built in 2016 cost £33,000 so this is a major expense to save, albeit we'll need to pay for footings for the garage.  I agree we should put everything on one application and as I think this project would be doable, I shan't be worrying about leaving what would be insurmountable problems for my son, should I die after the development is started - this has been my main worry.  As far as I can see from the Internet there is no Council Tax payable if a family dependent lives in the annexe/flat, but I'll need to check that with our Local Authority.  We haven't definitely decided to do this yet and I'm now excitedly re-designing the bungalow and looking up how to insulate etc, questions about which I'll ask in the appropriate area.  If we decide to go ahead, I'll reintroduce myself as this is a whole new project.   I shall now wait with baited breath that no-one will respond with their opening being "You can't do that because ..........."

[AliMcLeod]

48 minutes ago, Deejay_2 said:

I shall now wait with baited breath that no-one will respond with their opening being "You can't do that because ..........."

 

I'm not sure you'll get much response unless you split that into readable paragraphs...

[Deejay_2]

5 minutes ago, AliMcLeod said:

 

I'm not sure you'll get much response unless you split that into readable paragraphs...

Thank you and I can see what you mean.  I wasn't really seeking a response/advice in this instance, just explaining where we are.  If we decide to go ahead with the remodel, then I'll re-introduce myself as it's a totally different project from the original.

[Deejay_2]

Sorry to resurrect this post but still not sure of CIL situation.  We intend to apply for permission to demolish 1970's bungalow and construct new house on this site, together with demolition of single garage and construction of triple garage with granny flat over further down the garden - ie two separate buildings with garden inbetween them.  

1    We shall complete the required CIL exemption forms.  

2    We aim to construct the triple garage as soon as possible and this will trigger the commencement of the development.

3    It may be that we are never able to afford to replace the bungalow and therefore the CIL exemption will continue to be attached to the property.  We have no intention of selling the property.  

4    If we decide to refurbish the bungalow, does anyone know how/whether we can remove the CIL exemption attachment.

5    I am aware of the VAT refund implications - just simply concerned about having the CIL exemption attachment hanging around forever and what this might mean.

No-one is answering the phones at the LA so no help there.

[Temp]

The CIL rules don't cover every eventuality. Some cases/situations will have to be resolved in court. I'm not sure we can predict how it might go.

 

The council might argue that as you didn't finish in accordance with the approved plans you are in breech of planning. They might suggest you make a retrospective planning application for a refurb instead of a knockdown. However the CIL exemption is NOT available for a retrospective planning application.

 

https://www.pallantchambers.co.uk/blog_post/july-2021-cil-payment-exemption-is-not-available-for-self-build-houses-granted-retrospective-planning-permission/

 

Have you calculated the CIL liability?

[Deejay_2]

Temp - thank you for that very useful response.  I didn't know about CIL not being available for a retrospective planning application.  You have really stopped in my tracks and we need to pause and consider all eventualities before moving on with our application.

 

Just some thoughts

1   If we get planning approval and build the garage and then change our minds and decide to refurb the bungalow for financial reasons, do you know whether we could submit a new application and transfer the CIL exemption over to it - I can see from the very complicated example you have given that the owners had changed from an extension to a self build house - perhaps the outcome could have been different if they had stopped the job and gone back to planning before steering away from the original details of their approved application. 

 

2   I have roughly worked out the CIL at around £25,000 which I realise seems not much when compared with your example.  However, it's not a cost I would choose to incur if it can be avoided.  

 

3   Would it seem feasible to apply just to build the triple garage with granny flat over, build it, and then pause to consider a way forward at a later date. The garage shouldn't incur CIL involvement as the Gross Internal Area will probably not exceed 100 m2  when the GIA of the existing single garage to be demolished, is deducted.  We are in a Conservation Area so not sure whether this is a simple Householder Planning Application.

 

4   After building the garage, if we decide at a later date to apply to demolish the bungalow and construct a replacement then presumably the floorspace acquired via the triple garage will be added to the CIL liability exemption.  

 

5   If we decide to refurbish the bungalow and not increase the floorspace no CIL to consider.

 

6   If we decide to refurbish and add floorspace, then presumably the triple garage space will be included which would probably bring us into the CIL range.  

 

We have ploughed ahead with our plans for demolition, construction of new house and triple garage to enable us to take full advantage of the VAT refund.  We need to pause and try to get some "definitive" answers from the Local Authority re CIL.  At the moment, just undertaking the garage seems like the best way forward.  

 

Does anyone have any knowledge or thoughts on the above points.  Any further information I get from the LA, I'll post on here for information.

 

Many thanks again Temp.  You have made me see I need to try harder with the LA.  

 

 

 

[matthyde83]

I'm not sure how helpful but we've been on a strangely similar journey.

 

We applied for planning to demolish a bungalow for a detached 5 bed house with an attached garage and room over a few years ago.  As soon as planning was granted we go a CIL bill, claimed exemptions etc.

 

For various reasons (plans being copyrighted and I wasn't willing to go with the package supplier) we then had to do a whole new application.  This one was for a 5 bed house with a detached garage and room (salon for my other half).  Again CIL bill and claimed exemptions etc.

 

Funds reasons we decided to build the garage first so we sent in the CIL form prior to commencement and considered that commencement of development as we effectively started the whole thing by starting the garage.  CIL conditions state all we need to do now is submit a form within a certain period after completion.  Due to start knocking down the bungalow in Feb now.

 

My theory was we started whole development so CIL stuff needed sorting and also meant we'd started for our 3 year limit (we're within that anyway by starting in Feb so not testing it).

 

Question I suppose is if you never finish will the CIL ever need a completion notice....

[Deejay_2]

MatHyde83 - Your situation is very similar to ours except you have more certainty regarding completion of the whole development. We don't have that certainty due to available funds and may end up building the triple garage/flat and then just updating the existing bungalow at a later date. We have heard of horror stories of people inadvertently contravening the CIL rules, hence our pushing to get something in writing.   

 

Once I managed to locate the contact details for the CIL Officer, everything has been plain sailing. I hope the following is of help to others in a similar situation, although each local authority might have its own interpretation of the rules so always best to check. 

 

Below I have copied the CIL officer's response to my questions, received this morning, and I have to say I found him fantastic!

 

"In reply to your CIL enquiry/discussion After a little more investigation: 

Scenario 1 -  Separate Planning Applications - Submission of Planning Application to only Build Extension/annex first (refurb the existing bungalow)

You would need to submit CIL Form 9 to claim exemption for the annexe/extension prior to commencement of the development, the relief is applied the same way as a self-build, so you need to remain in the main residence for 3 years after completion of the annex/extension.

 

Note: Demolishing and rebuilding the bungalow at a later date under a separate planning permission won’t affect the claim so long as the new dwelling remains your main residence after completion of the rebuild. You will need a separate claim for the self-build exemption of the new build bungalow at the time of the new permission, a separate 3 year claw back period applies to the new dwelling.

 

Scenario 2 – Submission of Planning Application to demolish and rebuild the bungalow along with the construction of annex/garages under a single permission.

Submit Form 7 to claim self-build exemption for everything. Again this needs remain your main residence for 3 years after completion under CIL legislation.

 

In both scenarios you can claim exemption for everything, but all the forms must be submitted before commencement. If you are uncertain about the ability to complete scenario 2 it is advisable to go down the route of scenario 1 and make two separate applications with separate exemption claims for each due to the impact of commencing on relief claims under CIL legislation.

 

I’ve also spoken with a planning officer who advises you add a brief note to both applications laying out why you have done it this way so the officer understands the whole picture re: build costs etc. and look at the site as a whole."

 

[Temp]

Remember to check the VAT rules..

 

Scenario 1:

 

The annex would be standard rated unless it can be seperately occupied to the bungalow (eg the planners accept it can be sold off as a separate dwelling). 

 

Demolishing the bungalow under a separate planning application. The guidance says all existing buildings on the site should be removed to be eligible for zero rating. Now I've heard they might allow a garage to be retained but yours would be a habitable building. They might argue the bungalow is just a big annex to the existing dwelling above the garage. 

 

Scenario 2: 

 

This appears to be eligible for zero rating.

[Deejay_2]

Thank you for your response and so to more researching.   As a result of the LA's response at the moment we intend to demolish the existing detached single garage sited near the existing bungalow and construct the triple garage with granny flat over.  This will incur a CIL charge for which we will apply for exemption.

 

Your answer Temp has now put our current plans into question.  My belief up until your response is that if we construct the triple garage/flat under its own planning approval, and then decide sometime in the future to demolish the bungalow and replace it with a new house, we could submit a separate planning application for this.  We would live in the flat until the new house is built and then it would be just me in the granny flat thereafter.  I thought we would be able to submit a VAT reclaim for the bungalow demolition and replacement house, but there would be no VAT reclaim for the garage/flat.

 

From my research this morning of the HMRC information, I can't find any reference saying all existing buildings on the site have to be demolished, habitable or otherwise - are you able to point me in the direction of where it says this.  My interpretation is that the info means that the demolition of the property being replaced has to be demolished completely.    We realise that by submitting two separate applications we will forgo the VAT reclaim on the garage/flat, but it would be a lot of money to lose if the same applies to replacing the house on a separate planning approval at a later date. Any help is much appreciated as I seem to clarify one area, only to be faced with another. 

 

The following is a quote from another thread which is very similar to our situation :

 

"HMRC will go to great lengths in an attempt to reduce or totally refuse your reclaim and it’s down to you or us to evidence to them that we are correct. This specific claim comes to mind because it has  only just been resolved so it’s fresh in my memory. It has taken a whole year almost to the day to get  resolved, but yes, the client did get paid. The client built a new house, an annexe, and some barns. Neither the annexe nor the barns qualify for VAT reclaim or zero rating. The client built the annexe first and moved into the annexe to live while the main house was being built. Then moved into the main house and then completed the project by building the barns. We presented a completion certificate to HMRC with the reclaim that was 7 days after the date on the completion certificate, so that’s 10 weeks inside the 3 month deadline for submitting the reclaim. HMRC investigated the claim, valued around £40k and advised they had evidence that the house had been lived in for many years longer than the date we had put as a moving in date and therefore HMRC felt this claim could and should have been submitted before the time it was. HMRC had viewed the voting register and the council tax banding list and as the family were living in the annexe, it proved they were living on site but not in the house. By total chance the client found a photo showing them at the annexe with no house in the background and took another photo of the site as it stands today, showing the house was in the background now, evidencing that the annexe was built first. We now thought and hoped this would allow the claim to proceed, it did not. HMRC came back with a claim that the 
reclaim included material for the annexe and the barns, neither of which qualify for VAT exemption or refund, which they did not. HMRC offered an olive branch by requesting the client make an offer of a reduction of the claim value and begrudgingly the client offered £2k. HMRC then hired a drone to take photos of the site from above and highlighted the square meterage of the barn and annexe against the square meterage of the house in order to try and get the client to increase the reduction further. This was now 9 months and 6 letters from HMRC into the claim, the client advised they would accept a £5k discount, HMRC accepted this. A year to the day of submission I had a discussion with a senior officer at HMRC and voiced my displeasure at their tactics in this reclaim and that person went away and looked at the claim. Three days later the claim was refunded in full, with no discount taken from the original submission. That was a result."

 

 

 

 

 

 

[Deejay_2]

This is an update.  I phoned the HMRC VAT DIY Builders enquiry line this morning.  I explained about our situation regarding the CIL exemption and the advice from our local authority to submit two separate applications ie one for the triple garage/flat and a future one for the demolition and replacement of the bungalow if we decide to go ahead with it.

 

I asked if doing the development this way would affect our eligibility to apply for the VAT refund. 

 

The conversation started off positive with her saying initially if there were two applications they would just consider the one for the house - the garage/flat wouldn't concern them.  I said that the garage would presumably show up on the plans for the house - she said they don't need a location plan so they wouldn't know about it - all a bit iffy I thought. 

 

 I pressed on explaining that we would have submitted just one application for the whole development had it not been for the CIL complication but were concerned that by following the advice of the CIL officer we might fall foul of HMRC re VAT reclaim.

She then said it would depend on what was written in the planning approval eg if it says in the approval for the house that the garage and house must be sold as one entity, then this would draw their attention and might preclude us from the claim, but that in her role she would have to consult a higher office to get their advice.  Well there's no answer to that as I don't have a crystal and am therefore unable to predict the wording of the planning approval.

 

So from positive to negative. 

 

I asked who else I could ask for a more positive response and she gave me the address of the VAT written enquiries but said they would probably say the same.  I would like to write to them (at least I should have something in writing and it will be seen that I tried to sort this out before applying for planning permission).  

 

Does anyone think it's a bad idea to involve HMRC at this stage.  Any thoughts much appreciated.  I'll post the outcome in the hope it might help someone else.