The government intends to create Investment Zones (IZ) in England and to work closely with the devolved administrations to establish IZ in Scotland, Wales and Northern Ireland. Companies and new development located within IZ will benefit from a range tax and planning incentives; tax measures will encourage investment and employment, the need for planning permission will be lessened, and additional /new land will be made available for development.
This move was announced in September 2022 and with the Prime Minister and Cabinet changes, what’s next for IZ is as yet unclear. However, the government invited Expressions of Interest (EOI) to be submitted by 14 October 2022 and many have done so. This article provides a summary detailing what Investment Zones may mean for your development plans, particularly from a Planning perspective.
Background on Investment Zones
The government intends that the local authorities, Mayors and those in control of the IZ will designate ‘development sites’ for housing and commercial development and will take measures to support accelerated development. The process of designating these development sites has yet to be described by government.
The creation of the IZ will require primary legislation to be enacted prior to a site’s commencement. And so, any government intention and ambition for IZ is likely to be influenced by the parliamentary process, notwithstanding the current majority. The government envisages that IZ will be within a Mayoral Combined Authorities (MCAs) and Upper Tier Local Authorities (UTLAs), district councils have seemingly been excluded from submitting EOI.
Some details of the various corporate tax, employment taxes, stamp duty and Duty and VAT reliefs that may be available to companies established in designated sites within IZ have been published and these are set out below. Again, caution is needed as this list is likely to be amended:
- 100% first year allowance for companies’ qualifying expenditure on plant and machinery assets for use in tax sites.
- Accelerated relief to allow businesses to reduce their taxable profits by 20% of the cost of qualifying non-residential investment per year, relieving 100% of their cost of investment over five years.
- Full Stamp Duty Land Tax (SDLT) relief for land and buildings bought for use or development for commercial purposes, and for purchases of land or buildings for residential developers
- Zero-rate Employer NICs on salaries of any new employee working in the tax site for at least 60% of their time, on earnings up to £50,270 per year, with Employer NICs being charged at the usual rate above this level.
- 100% relief from business rates on newly occupied business premises, and certain existing businesses where they expand in English Investment Zone tax sites. Councils hosting IZ will receive 100% of the business rates growth in designated sites above an agreed baseline for 25 years.
In a recent House Of Commons debate, the Secretary of State at the time gave an indication that government will make additional public sector funding available for aspects of IZ. However, this must now be in some doubt with recent government changes. Notwithstanding extra funding or not the central tenet of an IZ is the waiving and lifting of regulatory and tax requirements. One of the key barriers to increasing productivity, increasing growth and accelerating development is seen by the government as the ‘red tape’ of the planning process. Quite how this process will be ‘relaxed’ to be less of a barrier is unclear. As many practicing planners will tell you much of the delay in determining applications is often caused by delays in the response of statutory consultees – each struggling from cuts to staff and unable to respond within tight timescales. Tensions within the current government will also require a balance to be achieved between community involvement in whatever changes are made to decision-making and speeding up of development.
Implications for Planning
From the perspective of planning policy, the government intends to allow IZ to (in some as of yet undefined) way set aside existing development plan policies. Quite which ones and how they will be legally set aside will require some careful legislative drafting. And some quick local plan work!
In setting aside existing development plan policies, it is anticipated by government that the ‘new policy framework’ will allocate/release additional land for housing and commercial development. This rapid change is likely to lead to procedural and political challenges, with any such new allocations of land for development being challenged by objectors. The need for some types of development to obtain planning permission may be waived with changes made to the use classes order and ‘permitted development’ rights. Such changes are likely to be modest as developments of any magnitude will necessitate some scrutiny by regulators to ensure that flood risk is not exacerbated or highway access is to standard etc. The overall objective of an IZ will be to minimise the need for applications for planning permission and for the process of making and determining applications to be streamlined. However, no details of how have been released. The government’s ambition is that new development sites may be co-located with, or separate from, tax sites, depending on what ‘makes most sense for the local economy’ – how so ever that is to be measured? The Secretary of State for the Department for Levelling Up, Housing and Communities will set out the selection criteria to become an IZ, and the process for designating sites within it.
The government has committed to ensure that (some) existing national planning policies will be retained and will be ‘material’ in determining applications within IZ. Again quite how this will be achieved is unclear, however, those national policies that have been highlighted as relevant include those which ensure developments are well designed, maintain the Green Belt policy and protect national heritage. What this means for a proposed development will depend on the detail. Similarly, the government has indicated that new developments must ‘address’ issues of flood risk, public safety matters and building regulations. The devil is in the detail! The government has also indicated that developments that already have permission measures will be taken to accelerate the delivery of these sites.
Benefits of Investment Zones
A key benefit of IZ will be to accelerate developments which are in the concept/design stages and to encourage additional development proposals there will be a new faster and more streamlined process for the granting of planning permission.
In particular, the government ambition is to:
- Remove such EU requirements as are considered not to protect the environment
- Ensure developer contributions are for essential infrastructure requirements only
- Reduce consultation periods with statutory bodies
- Relax key national and local policy requirements
The government has indicated that IZ sites may be aligned with existing local growth strategies and transport plans. From a quick review of the information available on EOI, many of the submissions are based on these strategies. Sites that already have a masterplan, development order or outline permission are included by some MCAs and UTLAs as a potential IZ, whilst others include land where planning consent is yet to be granted. The government has confirmed that development sites where planning policies and regulations are to be simplified may be co-located with, or separate to, tax sites, depending on ‘what makes most sense for the local economy’ – again who decides?
The government has not been prescriptive on the governance and decision making for an IZ and expects MCAs and UTLAs to fund any governance arrangements and any organisation set up to administer an IZ. The government is requiring MCAs and UTLAs to demonstrate that they have business sponsors to lead and drive investment opportunities. Mayoral Combined Authorities (MCAs) and Upper Tier Local Authorities (UTLAs) where there is no MCA, were invited to complete a full EOI to submit to the government by 14 October 2022.
More information is expected from government later this month on the future of IZ. If you’d like to have a chat with one of our planning experts about Planning requirements or IZ, contact us at email@example.com.