Capital Funding Guide

10. Finance

This chapter sets out the conditions and procedural requirements for the use of public subsidy.

1. Overview

1.1 Purpose

1.1.1 This chapter sets out the conditions and procedural requirements which aim to ensure that public subsidy is:

• Used correctly and in accordance with general fiscal legislation
• Accounted for accurately
• Administered in line with the correct procedures

1.1.2 This guidance also applies to homes funded through the Affordable Homes Programme (AHP) 2021 to 2026 and earlier programmes including the Shared Ownership and Affordable Homes Programme (SOAHP) 2016 to 2021.

Bidding for SOAHP 2016 to 2021 funding closed in 2021. The focus of this programme is now on delivery. Final completions are expected to deliver by March 2026 for Continuous Market Engagement (CME) and March 2028 for Strategic Partnership schemes.

1.2 Context

1.2.1 Use of Social Housing Assistance / Social Housing Grant is governed by Homes England terms and conditions, and principles as described in the Programme Management chapter (section 1.4) and relevant clauses in the Affordable Homes Grant Agreement.

1.2.2 Grant Recovery is governed by the Recovery of Capital Grants and Recycled Capital Grant Fund General Determination 2017 and / or clauses in the relevant Affordable Homes Grant Agreement for the programme period.

1.2.3 The use of grants paid in respect of Right to Acquire and Social HomeBuy is governed by statute. Please refer to the guidance for further information.

Section 35 of the Housing and Regeneration Act 2008 requires Homes England to specify:

• The procedure to be followed in relation to applications for grant
• The method for calculating, and any limitation on, the amount of grant
• The manner in which, and time or times at which, grant is to be paid
• Any other terms and conditions on which such a grant is given

These details can be found in the Right to Acquire and Social HomeBuy chapters of this Guide.

1.3 Other sources of funding

1.3.1 Social Housing Assistance/Social Housing Grant can be combined with other sources of funding, including:

• Long-term loan from a bank/building society/other (a mortgage, the bond market or other borrowing facilities)
• Recycled Capital Grant Fund - where permitted, see the Grant Recovery chapter
• Other public subsidy - for example, gap funding grant from a local authority
• Discount on land from the public sector
• Discount on land from the private sector (arising from a local authority imposing a planning obligation enforced through a Section 106 Agreement) although Homes England expects that Section 106 schemes will be delivered at nil grant as set out in its AHP 2021 to 2026 funding guidance.
• Providers’ own funds
• Charitable donations

1.4 Other Public Subsidy

1.4.1 Previously the Capital Funding Guide (CFG) has drawn a distinction between deductible and non-deductible other public subsidy with deductible other public subsidy reducing entitlement to grant. This concept is no longer relevant, with grant levels for schemes set through competitive bidding rather than a formula. Grant is not adjusted due to the receipt of other public subsidy.

1.4.2 For information on how the Office of the Gas and Electricity Markets’ Feed in Tariff impacts on the Affordable Homes Programme please refer to guidance published on Homes England’s website.

1.5 Other Public Subsidy: Discounted Land

1.5.1 When recording details of other public subsidy: discounted land, the discount is the difference between the total consideration paid by the provider and the restricted value of the property. The restricted value takes in to account any reduction in value brought about by any fettering of the future use of the property by the seller. If no such restrictions are placed on the property, the restricted value will be the same as the unrestricted value. For an example see below.

Other Public Subsidy: Discounted Land

Example

If a local authority sells land subject to a nomination agreement which requires more than the baseline 50% nominations for grant funded schemes, this will restrict the value of the property. Without this restriction a site may be worth, say, £1.5 million (the unrestricted value). However, with the requirement to enter in to a long-term nomination agreement providing, say, 100% of initial lettings and 75% of true voids, the Restricted Value of the site will fall to (say) £1.3 million. If the provider pays £1.3 million, they will NOT be considered as having received £200,000 of other public subsidy, as they will have paid full value for the site, given that it is fettered with the nomination agreement.

Definition

Consideration is the thing of value that one party gives to another under a contract. Often, it comes in the form of money, but it can also come in the form of goods or services. Thus, the total consideration paid by one party under a contract to the other party may be a mixture of monetary-consideration and consideration-in-kind. An example might be a Registered Provider offering nomination rights to affordable housing to an employer, a local authority or other body. Having the right to nominate someone in to affordable accommodation has a value. Thus, nomination rights can be consideration-in-kind.

1.5.2 Both the restricted value and the unrestricted value should reflect the uses for which a planning permission is likely to be obtained.

1.5.3 Providers must obtain professional valuation advice on the effect on value of any restrictions placed on land by the seller.

1.5.4 Providers must also note the difference between ‘total consideration’ and ‘price’. Homes England will count the organisation’s scheme as being in receipt of other public subsidy if the value of the monetary consideration paid (the price) and the consideration-in-kind provided is less than the restricted value of the property.

2. Funding conditions

2.1 General

2.1.1 Providers are not required to sign up to separate Funding Conditions via IMS. Instead the Funding Conditions have been incorporated into the Grant Agreements.

2.1.2 Previous funding conditions refer Registered Providers to their responsibilities in respect of the 2012 Construction Commitments — Affordable Housing Provider version. This does not apply to schemes funded through the AHP 2021 to 2026 Grant Agreement.

2.2 Acceptance of the AHP Grant Agreement (contract)

2.2.1 Providers developing a programme of schemes under the AHP 2021 to 2026 (or SOAHP 2016 to 2021) must formally accept the terms and conditions as contained within the relevant AHP Grant Agreement. This will require a Board decision and providers must retain a minute of their Board’s decision on file for compliance audit purposes.

2.2.2 Signing the grant agreement will be deemed as acceptance of the terms and conditions.

2.2.3 Providers will not be able to claim grant unless the grant agreement has been agreed and signed.

2.3 Personal, proprietary and pecuniary interest

2.3.1 Providers should ensure their members, employees, agents or consultants, or those of any of their partner organisations must not have any personal, proprietary and pecuniary interest in:

• Any person from whom the provider is purchasing land or property
• Any contractor engaged by the provider or
• Any land or property to be acquired or developed in connection with their AHP 2021 to 2026 programme (or SOAHP 2016 to 2021).

2.3.2 Providers must also ensure their members, employees, agents or consultants or those of any of their partner organisation are not given preferential treatment by virtue of their position or associations whether in terms of access to land and properties developed, rehabilitated or disposed of, or the prices at which such land and properties are let or disposed of.

2.4 Breaches of the Affordable Homes grant agreement

2.4.1 Homes England may impose penalties including changes to the level of or suspension of funding if its terms and conditions as outlined in the grant agreement are not met.

2.4.2 Where providers fail to comply with terms and conditions as set out in the grant agreement, or if there is any cause for serious concern about the provider’s performance, financial viability or compliance with Regulatory standards, Homes England reserves the right to suspend funding. This may also trigger grant repayment (plus interest where applicable) as outlined in the grant agreement.

2.5 Funding Conditions prior to the AHP 2021 to 2026

2.5.1 Homes England’s affordable housing programmes prior to the AHP 2021 to 2026 were subject to Funding Conditions, and:

• The Affordable Homes contract (for schemes delivered under the SOAHP 2016 to 2021)
• The Affordable Homes contract (for schemes delivered under the AHP 2015 to 2018)
• The Framework Delivery Agreement (for schemes delivered under the AHP 2011 to 2015)

2.5.2 As there is no possibility of new schemes starting under these previous programme arrangements, there is no longer a requirement for providers to sign up to the Funding Conditions via Homes England’s Investment Management System (IMS). All new schemes delivered through the AHP 2021 to 2026 will be subject to the grant funding conditions that are included in the relevant form of AHP 2021 to 2026 Grant Agreement.

3. Grant claims and payments

3.1 General

3.1.1 Providers must not claim grant:

• If they do not have a secure legal interest in the property, ie, the grant recipient organisation must have secure legal interest in the land / property at the point of claiming grant; secure legal interest should not be held by another company within or outside of any group structure
• In advance of need i.e.:
  • When the provider has not entered into the commitment for which the grant payment is intended OR
  • Even though contractually committed, the provider does not yet have to make payments
  • Before the relevant payment milestone has been achieved (please see Milestones entry)

What is ‘a secure legal interest in the property’?

For schemes being delivered through the AHP 2021 to 2026:

• Freehold title registered with title absolute
• Leasehold title registered with title absolute where the following are achieved as a minimum:
  • For all Shared Ownership homes a 990 year lease length (except for the HOLD variant product where the minimum lease term should be 125 years – see Shared Ownership chapter, paragraphs 5.3.4.1 and 5.3.4.2 for more detail)
  • For all Affordable Rent, Social Rent and Rent to Buy homes a 125 year lease length, except
  • Empty Homes schemes delivered through the Lease and Repair route where the lease should be between 5 and 30 years length
• Freehold title registered with possessory title or good leasehold title and defective title indemnity insurance in favour of the provider with a limit of indemnity to at least the Total Grant Required for that site, or
• A binding contract with the owner of the legal and beneficial interest in the site to secure one of the interests above and that securing that interest is conditional only upon matters that are within the direct and unilateral control of the provider.

Shared ownership homes with the ability to staircase to 100% must have the freehold available for transfer to the shared owner when they reach 100% ownership. Homes which fall into the following categories are exempt from this requirement:

• flats
• community led development
• inalienable National Trust land and inalienable and excepted sites on Crown land
• retirement housing
• leasehold land owned as at 21 December 2017 – so long as the owner develops and land has not been sold on since
• houses above or below other structures – as part of definition of house for purpose of the ban – for example, a house built over a communal underground car park could still be leasehold.

Although the minimum lease length for Affordable Rent, Social Rent and Rent to Buy homes is a minimum 125 years, providers are encouraged to develop AHP 2021 to 2026 schemes with the maximum lease length possible. This is to ensure that any future potential mortgage issues are minimised if the Right to Shared Ownership is exercised on rented schemes or Rent to Buy homes are purchased outright or on a Shared Ownership basis.

These terms apply universally to all rental homes delivered through AHP 2021 to 2026 whether currently within the scope of Right to Shared Ownership or not.

For schemes being delivered through the SOAHP 2016 to 2021:

• Freehold title registered with title absolute
• Leasehold title (where the lease has at least 60 years’ unexpired duration) registered with title absolute or in the case of any scheme comprising Shared Ownership homes 99 years unexpired duration from the projected purchase point
• Freehold title registered with possessory title or good leasehold title and defective title indemnity insurance in favour of the provider with a limit of indemnity to at least the Total Grant Required for that site or
• A binding contract with the owner of the legal and beneficial interest in the site (owning either a freehold interest or a leasehold interest of at least 60 years’ unexpired duration) to secure one of the interests above and that securing that interest is conditional only upon matters that are within the direct and unilateral control of the provider.

Please see also the Procurement and Scheme Issues chapter (section 4.3) for additional information on good title.

For example:

The scheme may involve a local authority selling land to the provider on completion of the construction of the dwellings to the standards required by the local authority. Therefore, at the start of the building contract, the local authority still owns the land, not the provider.

In order to be able to go on to the local authority's land and hand possession of the site to the builder, the provider will need permission to do so from the local authority, as they are the landowner or it will be guilty of trespass. This permission is usually granted in a document called a Building Licence, i.e. the landowner licences somebody else (the provider) to go on their land and undertake the Works. The provider, in turn, licences the building contractor to go on the land and undertake the Works on their behalf, through the building contract.

A Building Licence itself does not mean that when the dwellings are completed the provider has any legal interest in the property; it is simply the local authority granting permission to the provider to construct dwellings on its (the local authority’s) land. If other appropriate steps are not taken, the provider could end up having paid for the construction of the dwellings which are then retained by the local authority.

To avoid this, the provider will only undertake the construction of the properties once it binds the local authority in to a contract to sell the land upon completion of the dwellings. This may be by the provider and the local authority exchanging contracts for the sale of the land to the provider, with a condition that the provider undertakes the construction of the dwellings to an agreed standard.

As the provider is in control of the terms of the building contract, they can control whether the condition in the land contract is fulfilled or not. It is this control over the conditional contract that gives the provider sufficient legal interest in the property.

When the dwellings are complete, the condition has been fulfilled, and the land contract becomes unconditional and completion will then take place automatically.

An alternative approach, rather than exchange a conditional contract, is for the provider and the local authority to enter into an Agreement for Sale. This is a separate contract from the contract for sale of the land, whereby the local authority formally agrees that when the provider has constructed the properties to the agreed standard, they (the local authority) will sell the land and properties to the provider on agreed terms.

There are variations on both of these themes, but they share the underlying purpose of providing the provider with certainty that they will become the eventual owners of the property. This certainty is what provides the ‘secure legal interest’.

Clearly, land contracts which contain conditions that are beyond the control of the provider provide much less certainty that the provider will eventually become the owner of the land. For example, exchanging contracts with a condition that the provider will obtain a planning permission that is deemed ‘suitable’ by the provider and/or the seller is much less certain. Under these arrangements, it is quite possible that the provider may never be able to meet that condition, and so may never obtain the land. Thus, even though they are in contract with the landowner, they would not have obtained a secure legal interest.

Providers should seek legal advice on the best contractual mechanism to ensure that they obtain a secure legal interest in the property. If the provider is not already the landowner at the time of claiming grant, they must explain to Homes England exactly how they have a “secure legal interest in the property”.

3.1.2 For schemes delivered under the AHP 2021 to 2026 (and SOAHP 2016 to 2021) grant will be paid on a per scheme basis in three tranches - at acquisition, at start on site and at practical completion. Note that all of these three payment tranches are not relevant to all scheme types and are different for registered and unregistered providers. Refer to the Programme Management chapter (section headed Milestones) for more information on claiming payment tranches and the different payment arrangements for registered and unregistered providers.

3.2 Bank details

3.2.1 When providers are due to receive grant from Homes England for the first time, they must provide details of the bank account to be credited, and notify any subsequent change of bank or account details. Why?

Homes England pays grant directly into the providers’ bank account. Therefore we require details of the provider’s bank accounts, otherwise grant cannot be paid to the provider.

3.2.2 Providers must provide their bank details in writing on company headed notepaper, or direct from the organisation’s business email address, to Homes England’s Finance Department.

3.2.3 If bank details are provided by email they must be sent directly to apenquiries@homesengland.gov.uk and the email address from which they are sent must be clearly identifiable as coming from the organisation. Forwarded emails and those from personal email addresses are NOT accepted.

The following details are required:

• Bank name
• Bank branch/address
• Bank sort code
• Bank account number
• Bank account name

3.2.4 Providers nominating another body to receive payments, e.g. a solicitor, must notify Homes England’s Finance Department of the payee’s details. The payee must then provide their bank details as described above, quoting the provider’s name and IMS Provider Code (this should not be confused with an IMS scheme number).

3.2.5 All providers’ claims for payment of grant must be submitted through the IMS. IMS guidance documents are on the IMS website.

3.3 General procedural requirements

3.3.1 At the point of claiming grant providers must confirm:

• That the application for grant payment is correct and conforms with the Affordable Homes Grant Agreement (or previous conditions, contract or agreement is applicable) plus any further conditions issued by Homes England in year (if the provider is unable to confirm this, the application for grant payment will be rejected)
• Acceptance of the certifications that appear on the IMS screen when the scheme has been submitted
• For outstanding schemes, that Homes England’s Provider Management team has been notified of any change that has occurred to the scheme since bid stage
• That they (i.e. the provider) have (or will have) good title to the property
• That all necessary consents have been obtained prior to exchange of contract (for Off the Shelf and HOLD schemes)

3.3.2 In the case of Existing Satisfactory, Off the Shelf and HOLD, the single tranche of grant can be claimed upon completion of purchase contracts, provided that the property is fully developed and immediately available for occupation.

3.3.3 Providers will need to obtain approval from their Provider Management lead contact area for any scheme variation, including changes to milestone dates.

3.3.4 For schemes that fail to reach completion, providers must contact their Provider Management team lead as grant may be recoverable. See the Grant Recovery Determination, relevant events paragraph 7(e).

3.3.5 The Provider Management team will check that all comments made on IMS for any variations from the bid/offer stage are consistent with previously agreed changes for that scheme.

3.3.6 Homes England may terminate a programme/scheme and recover any grant paid on the scheme where:

• The programme/scheme no longer meets a strategic need
• The programme/scheme no longer offers value for money
• The provider has not previously told their Provider Management team lead of the changes, even if the changes are not fundamental

3.4 Start on Site claim

3.4.1 The following requirements do not apply to schemes delivered by unregistered providers where they have elected to be paid 100% at practical completion, to Off the Shelf schemes or through programmes prior to the SOAHP 2016 to 2021 and AHP 2021 to 2026.

3.4.2 Homes funded under the SOAHP 2016 to 2021 must have started on site by 31 March 2021 and be completed by 31 March 2022 (or 31 March 2022 for starts and 31 March 2023 for schemes granted an extension to delivery). For homes funded through the CME route of the AHP 2021 to 2026, they must have started on site by 30 September 2025 and completed by 31 March 2026. For Schemes funded through the Strategic Partnerships route of the AHP 2021 to 2026 they must start on site by the 31 March 2026 and be completed by the 31 March 2028.

New Build homes and schemes

3.4.3 The trigger for claiming grant at start on site for new build schemes is the date of the start on site of the main contract works. For schemes being delivered under the SOAHP 2016 to 2021 or AHP 2021 to 2026, this is deemed to be the date when the contractor takes possession of the site / property AND both parties have signed and dated the main building contract. Further, there is an additional condition that start on site works must have commenced. Start on sites works are defined as:

a) Excavation for strip or trench foundations or for pad footings

b) Digging out and preparation of ground for raft foundations

c) Vibroflotation, piling, boring for piles or pile driving

d) Drainage works specific for the buildings forming part of the Firm Scheme or

e) Such works of demolition or service diversion as are expressly and strictly contemplated in the Finance – Grant Claims and Payments section

3.4.4 It is not intended that the definition of start on site works in the Affordable Homes Grant Agreement excludes schemes where demolition works have begun or where infrastructure works (such as excavations to install drainage or highways infrastructure works including where such works are the subject of a section 278 or section 104 agreement) to support the scheme have commenced, subject to the conditions below. Starts on Site can therefore be recorded (and where relevant a grant claim submitted) in circumstances where:

Either:

a) A building contract has been signed and dated with a single building contractor to undertake both demolition and construction works or infrastructure and construction works

b) Demolition or infrastructure works have commenced

c) Upon completion of demolition works and site clearance, or of infrastructure works, construction works which meet one of the definitions in the relevant Affordable Homes Grant Agreement and repeated above (a-e) will immediately follow on

Or

d) A separate contract for demolition works or for infrastructure works has been signed and dated and a building contract with a building contractor has been signed and dated

e) Demolition works or infrastructure works have commenced

f) Upon completion of demolition works and site clearance or upon completion of infrastructure works, the building contract with the building contractor will be unconditional

g) As soon as the building contract becomes unconditional, start on site works which meet one of the definitions in the relevant Affordable Grant Agreement will proceed

3.4.5 For schemes delivered under the AHP 2011 to 2015, the above requirements apply and providers should refer to their Framework Delivery Agreement.

3.4.6 For schemes delivered under the NAHP 2008 to 2011, the above requirements apply with the exception that there is no requirement for start on site works to have commenced.

3.4.7 Service diversions

Where a building contract has been signed and dated with a single building contractor and the building contract requires service diversion works to be carried out before works which meet one of the definitions in the relevant Affordable Homes Grant Agreement (a-e) above, start on site can be recorded (and where relevant, a claim submitted), This is provided that the service diversion works will always be undertaken within the agreed contract period, and works which meet the definitions in the relevant Affordable Homes Grant Agreement or (a-e) above will immediately follow on from service diversions.

Rehabilitation homes and schemes

3.4.8 For definitions of schemes that should proceed through one of the rehabilitation processing routes please see the Procurement and Scheme Issues chapter of this guide, section 3.3. This will also include Lease and Repair schemes – see Procurement and Scheme Issues, section 4.

3.4.9 For some of these rehabilitation scheme types, in particular where funding is provided by Homes England for the purchase of individual properties (such as empty homes through Purchase and Repair and Lease and Repair), then there may not be a single main building contract. Depending on the level and type of works required to homes, works may be undertaken by different contractors and/or organisations (including in-house teams).

3.4.10 In many cases there may be a need for pre-commencement works (which are considered as eligible development costs) to be undertaken prior to the main repair works being carried out to a property. This may include, but not limited to:

• Utility checks and surveys (for example gas, electricity and water)
• Capping off the gas supply where required
• Asbestos surveys or other site safety surveys

3.4.11 For start on site to be claimed on such rehabilitation schemes, any pre-commencement works need to form and be eligible to be a part of the Total Scheme Costs of the scheme for which Homes England grant is being claimed. In addition, any repair works should immediately follow on from any pre-commencement works, even where they are undertaken by different organisations and subject to separate contracts or works orders.

3.4.12 If providers are unsure whether a rehabilitation scheme meets the above requirements then they should contact their Homes England Provider Management team lead contact.

3.4.13 For all such rehabilitation schemes where start on site is to be claimed following pre-commencement works having begun, then a clear audit trail of contracts, works orders, timings of activities, etc, should be maintained by the provider.

3.4.14 For both new build and rehabilitation schemes the amount of grant payable at start on site will be set out on the relevant payments screen in IMS.

3.4.15 Where the start on site grant tranche has been drawn down too soon the provider may be charged interest for the period between the date when the tranche was received by the provider and two weeks after the correct closing date for start on site. In such cases the provider must notify Homes England.

3.5 Start on Site – grey areas

3.5.1 Building Licence / Agreement to lease or buy

Where providers wish to start building works on land that they do not yet own, they must demonstrate that they have a secure legal interest in the property for grant to be payable. Specifically they must:

• Ensure there is a legally binding agreement that the legal interest in the property will be transferred to the provider immediately or within a reasonable timescale following completion of the development
• Seek legal advice to ensure they have sufficient security to proceed
• Be aware that if the scheme fails to complete, or the legal interest is not transferred to them, Homes England will recover any grant paid

3.5.2 In addition to the requirements on obtaining a secure legal interest in the property, the provider must not claim grant in advance of need (please see 3.1.1 above).

3.5.3 Golden Brick schemes

For an explanation of ‘Golden Brick’ please see below.

Golden Brick

A landowner may incur professional fees if, for example, they obtain a planning permission on their land or undertake investigatory work. These fees are likely to attract VAT. The landowner may wish to reduce these expenses by electing to charge VAT on the land when they sell it. VAT on the sale of land is charged at the standard rate of 20%.

However, the VAT rate for the sale of land and buildings that are part-constructed is 0%. The definition of ‘part-constructed’ is that ‘… a building is being constructed when work has progressed above foundation level. This is usually when walls begin to be constructed upon the foundations. These walls need not be above ground level. However, simply digging and concreting foundations is not sufficient.’ (paragraph 4.7.4, V1-8A, HM Revenue & Customs).

Therefore, the purchaser of properties constructed to at least this ’golden brick’ level pays VAT at 0% (i.e. no cost to them), while allowing the seller to reclaim the VAT which they paid on professional fees.

3.5.4 Providers can normally only claim grant when work has progressed from Golden Brick level onwards, so long as they also satisfy the conditions about secure legal interest and having signed the contract set out above. Where golden brick level has been reached, this would normally mean that the start on site works would have commenced (please see 3.4.2 above).

3.5.5 Providers must confirm the date when they completed on the purchase of the land under the Golden Brick arrangement. Grant is not normally claimable prior to that date.

3.5.6 For some guidance on Golden Brick scenarios and grant claims, please see below.

Under ‘Golden Brick’ arrangements, the provider enters in to a building contract for the completion of a development which is in the process of construction i.e. up to Golden Brick level.

Building work up to Golden Brick level has to be undertaken by the seller, not the provider. Therefore, by definition, the provider’s builder cannot have started work under the contract that they have with the provider prior to the buildings reaching Golden Brick level.

Grant is therefore claimable when the provider has signed the building contract for the completion project with their contractor, and the contractor has taken possession on site in order to undertake the work of completing the dwellings from Golden Brick level onwards.

The start on site grant claim is not payable when the seller’s contractor begins work on site, as for the grant to be claimed all three of the following requirements must be achieved:

• Providers must have a secure legal interest in the property
• Providers must have entered into their contract with their builder, to undertake the building works from Golden Brick level onwards
• Providers’ builders must have possession of the site and be undertaking the work from Golden Brick level onwards

As providers’ contractors cannot be simultaneously undertaking work on the properties that are ‘up to Golden Brick level’ and ‘from Golden Brick level onwards’, providers can only claim grant when work is ‘from Golden Brick level onwards’.

There may however, be occasions where the organisation selling the land and undertaking works to Golden Brick level is the same as that which the provider will contract with to undertake works beyond Golden Brick level. Under such circumstances, start on site may be claimed provided the following conditions are satisfied:

• The provider can demonstrate that it will be entitled to a secure legal interest in the property at the point at which Golden Brick is reached, for example, by entering into a legally binding agreement (such as an Agreement for Sale) with the vendor to complete the land acquisition/purchase with the achievement of Golden Brick providing the trigger for purchase completion. The Agreement for Sale (or other legal agreement) should include a backstop date allowing for either completion of land acquisition or termination if Golden Brick has not been achieved by that backstop date
• Grant tranches should not be claimed in advance of need. Thus providers should be paying money out for the works being undertaken to Golden Brick stage, as well as towards the land acquisition costs providers may choose to pay towards the latter in proportion to and with payments being made for works. Providers should have an obligation to make such payments before claiming grant. However, providers may wish to safeguard such monies until Golden Brick has been achieved, and it has completed purchase of the land and has a works contract secured for works post Golden Brick. Providers may choose to do this by holding the money in an escrow account, held to the benefit of the developer or as stakeholder, subject to achievement of the Golden Brick stage within the agreed timescale
• Where an provider wishes to claim start on site under a Golden Brick arrangement, as well as meeting the Golden Brick requirements set out above, they must also ensure that the definition of start on site set out in the 2015 to 18 Affordable Homes Grant Agreement, and set out in 3.4.6 have been achieved

3.6 Final (Practical Completion) claim

3.6.1 For grant purposes, practical completion is when the last dwelling is handed over, the scheme having been completed in accordance with the terms of the relevant building contract, as being fit for occupation as a residential development, in accordance with the relevant certifications and requirements. The relevant certifications and requirements will be dependent on the type of scheme (see 3.6.1.1 below). For schemes funded under the SOAHP 2016 to 2021 and AHP 2021 to 2026, this excludes minor defects and / or minor omissions at the time of inspection that are capable of being made good or carried out without interfering with the beneficial use and enjoyment of the scheme. For instance, a scheme can be classed as completed even though external works such as landscaping may remain to be completed.

There are additional requirements in respect of schemes constructed using Modern Methods of Construction (MMC) – please see Procurement and Scheme Issues, section 3.5.

3.6.1.1 For new build schemes the property must be covered by either a guarantee or similar warranty products provided by a reputable organisation. An architect’s certificate or any other professional consultant’s certificate is not acceptable.

For rehabilitation schemes there must be a full survey carried out by a building surveyor with an appropriate RICS qualification prior to start of works, identifying works required to ensure the building’s longevity is appropriate for the funding given. For most rehabilitation schemes this will mean a lifespan of at least 30 years, but there may be some schemes that have a shorter life expectancy - please see Procurement and Scheme Issues, section 3.3. Additionally, a building surveyor (not necessarily the one that carried out the survey) needs to certify on completion that those works have been carried out.

3.6.2 In the case of a new Off The Shelf development, a claim for grant should not normally be made prior to the completion date (as specified on the practical completion certificate issued by the duly authorised contractual party). However, the claim can be submitted against the issue of a certificate of partial completion provided all of the dwellings in the scheme, or phase, have been handed over.

3.6.3 Providers must input the following data in to IMS, based upon their forecast final costs (see IMS guidance for details):

• Rents and service charges, setting out any details that have changed since grant confirmation stage (not required for Re-improvements, Rehabilitation Works Only)
• Costs at practical completion
• Final cost calculation of grant
• Actual on-costs (fees, interest, minor works, insurance/bonds etc.)

3.6.4 At the point of claiming grant providers must confirm that their application for grant payment is correct and conforms to the conditions incorporated into the relevant Affordable Homes Grant Agreement as accepted by them when signing up to the agreement.

3.6.5 For completions delivered under the AHP 2011 to 2015 or the NAHP 2008 to 2011 the grant claim must be correct and conform to the funding conditions as accepted by providers at the beginning of the financial year.

3.6.6 For Affordable Rent schemes, rents will be calculated according to market rents at the time of letting.

3.6.7 For any Social Rent schemes agreed under the SOAHP 2016 to 2021 or AHP 2021 to 2026 providers should refer to the Housing for Rent - Social Rent section of this guide.

3.7 Social HomeBuy

3.7.1 Initial Sales Following legal completion of the initial sale Registered Providers must notify Homes England and can then claim grant based on the discount available to the purchaser. The amount of grant claimed should be calculated as per Social HomeBuy section 1.3.5 of this guide.

3.7.2 Registered Providers must claim grant within 10 working days of the date of legal completion and can only apply for grant after the legal completion of the sale, not before.

3.7.3 Staircasing Sales The same principles that apply to initial sales apply to the first and subsequent staircasing sales.

3.8 Right to Acquire

3.8.1 Following legal completion Registered Providers must notify Homes England, and can then claim grant based on the discount available to the purchaser as per Right to Acquire section 1.3.6 of this guide.

3.8.2 Registered Providers must claim grant within six months of the date of legal completion and can only apply for grant after the legal completion of the sale, not before.

3.9 Leasehold repurchase

3.9.1 Shared Ownership - General: Total grant payable will be up to 70% of the value of the shares being repurchased. Payment will be in a single tranche, payable on practical completion.

3.9.2 Shared Ownership - Rural Repurchase: Total grant payable will be equal to the market value of the shares being purchased, less any surpluses from previous staircasing receipts and other subsidy or recycled grant (please see Help to Buy: Shared Ownership section 8.4). Payment will be in a single tranche, payable on practical completion.

3.9.3 Shared Ownership - Protected Area Repurchase: Total grant payable will be equal to the market value of the shares being purchased, less any surpluses from previous staircasing receipts and other subsidy or recycled grant (please see Help to Buy: Shared Ownership) section 9.4). Payment will be in a single tranche, payable on practical completion.

3.10 Payment

3.10.1 Homes England will pay grant within 10 working days of the claim being approved for payment.

3.10.2 Homes England will compensate the provider for any late grant payment that is the sole responsibility of Homes England. The compensation will be for any interest charges suffered or for any potential loss of interest that would have been earned by the provider. It is payable upon receipt of a claim from the provider supported by evidence that such loss has been incurred. The claim can be in the form of a letter addressed to the Finance Department containing an explanation of the amount of the loss, how it has been incurred together with relevant calculations.

3.10.3 The interest rate payable will be at the maximum of the Bank of England base rate plus 4%.

4. VAT

4.1 General

4.1.1 VAT (input tax) is payable on works to existing stock and some works in new build contracts (e.g. landscaping, equipment, furnishings). Providers’ outputs under the AHP 2021 to 2026 (or SOAHP 2016 to 2021) are for tenures which Homes England understands are an exempt supply.

4.1.2 Providers should always seek their own advice in relation to matters of taxation, but with reference to the above statement, providers should refer to VAT Notice 708, which advises that, for Shared Ownership, ‘the initial payment by the occupier for his share of the equity can be zero rated. The subsequent rental payments and any additional ‘staircase’ payments are not zero rated but exempt.’

4.1.3 Homes England strongly recommends that providers refer to the wide range of information available on the HMRC website.

4.2 VAT on major repairs

4.2.1 If the provider reclaims VAT on major repairs schemes which have already received 100% grant funding, the grant paid in relation to VAT will be reclaimed as unexpended grant.

4.2.2 The provider may retain reasonable costs incurred in recovering the VAT where these can be justified. Each case will be considered on its merits.

5. Money laundering regulations

5.1 General

5.1.1 Providers must ensure that they are aware of these regulations, and adhere to them. Refer to the guidance for further information:

Providers’ activities may mean that they come under the ambit of the Government’s Money Laundering Regulations. For example, some providers may be treated as undertaking estate agency activities. Providers will need to obtain legal advice on the extent to which their activities are covered by the relevant regulations, and ensure that they comply with them.

5.1.2 Some of the Money Laundering Regulations relate to persons who act as high value dealers. It is unlikely that providers would be considered high value dealers when undertaking Affordable Home Ownership activity, but they must ensure that they satisfy any requirements of the regulations.

Providers must seek their own advice as necessary in order to ensure compliance.

5.2 The regulations

5.2.1 Details of the Money Laundering Regulations are on the HMRC website. Also, the Financial Conduct Authority is a useful source for information and advice on such matters.