Community infrastructure levy (CIL) is a new levy that local authorities are empowered to charge on new developments in their area. Existing section 106 (s106) charges will remain, however they will be restricted to site-specific mitigation and affordable housing. There should be no overlap in the use of CIL and s106, meaning no developer will pay twice.
Money raised can be used to support development by funding infrastructure projects. Although few authorities are currently charging, it is expected that many will follow in the short term.
Rates of CIL will be set by each local authority and based on a funding gap, calculated with reference to their own infrastructure plans. The rate bandings for CIL may be zoned and will typically be different for residential, retail and other. The proposed rates will be published in advance and have to be approved locally. CIL may be a significant cost, for example Wandsworth recently proposed a CIL rate for residential of £575/m2.
The key elements of CIL are as follows.
- CIL is calculated with reference to the increase in gross internal areas of the proposed development from what is currently on the site. This 'net area chargeable' is then multiplied by the relevant rate (£/m2).
- Generally the liability applies to the owner of the land, or leaseholder, if leasehold interest is greater than seven years, though it can be transferred.
- The liability arises upon grant of planning permission, and collected upon commencement of the development.
- There are defined rules for notification of relevant events, and a comprehensive system of penalties for non-compliance.
- There are various limits to the charge, the most relevant being that any new build, including extensions, is only liable for the levy if it has at least 100m2 of gross internal floor space, or involves the creation of one dwelling, even where that is below 100m2.
Key issues to consider include the following.
- Try to secure planning permission before CIL is adopted locally.
- Because CIL is broadly levied on an increase in internal floor space, CIL should be more expensive for greenfield sites than brownfield developments. Measuring existing internal space will now be very important in planning applications.
- CIL is triggered on grant of planning consent, but subsequent minor amendments requiring consent can trigger another CIL payment. This has been pointed out, but not amended to as it stands, it is best to get the scheme right first time unless you wish to risk paying twice or more.
- There are a number of notifications and compliance obligations. Project funding, cash flow profitability forecasts, accounts and pricing decisions will need to take account of CIL.
- Consider CIL mitigation strategies and the interaction with the other mainstream taxes.
There is discretionary relief from CIL in exceptional circumstances, but the indications are that this relief will be used sparingly. There are also specific exemptions from CIL for charitable concerns and affordable housing.
Implications and conclusions
CIL is now with us and here to stay. If your local authority has brought it in then you will need to consider the cost of this for your development and the compliance obligations. Where it hasn't been brought in, it is likely to be soon, but there may be a window of opportunity in the short term.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.