What is a Community Infrastructure Levy? Planning Charges Explained
Anyone planning to do a property development or building work may have to pay the Community Infrastructure Levy. Here’s what the Community Infrastructure Levy is and how it works.
What Exactly is a Community Infrastructure Levy?
The Community Infrastructure Levy is a charge payable by those planning many kinds of building work and property development. It is technically known as a planning charge, but in practice, it is a kind of tax on new development.
The money received from the Community Infrastructure Levy is used to pay for, as the name suggests, local infrastructure such as roads, transport and new schools amongst other things.
The Community Infrastructure Levy was originally introduced by the Planning Act 2008 and is sometimes known as CIL for short.
Access our selection of exclusive, high-yielding, off-market property deals and a personal consultant to guide you through your options.
Who Has To Pay?
Anyone who is planning a building project or property development including both residential and commercial developments over a certain floor area may have to pay a CIL, subject to some exemptions.
A Community Infrastructure Levy is only payable on developments that create 100 square metres or more of additional floor space. A CIL is normally payable on new build houses and flats of all sizes, however.
Where is it Payable?
A Community Infrastructure Levy is only payable where the local authority has adopted the CIL system in their area and has a plan for levying it. The system works slightly differently and is charged at different amounts in different areas.
In England, authorities who can charge the levy are the relevant local planning authority for the area. These include borough or county councils, unitary authorities, national park authorities, mayoral development corporations and the Mayor of London. The Mayor of London is able to apply a supplementary levy on top of that levied by the London boroughs.
The Community Infrastructure Levy outlined here is applicable only in England and Wales. Scotland has separate arrangements.
There are a number of exemptions from the Community Infrastructure Levy:
- Householders who are planning an extension or annexe on their own residential property do not have to pay a CIL.
- Self-builders who are building or managing their own self-build developments do not have to pay a CIL.
- The CIL is not payable on buildings into which, to quote the legislation, ‘people do not normally go’ or ‘people go into only intermittently’. This might include buildings used for storage or agriculture.
- The CIL is not payable on structures which are not buildings. For example, mobile phone masts.
- Social housing developments and charitable developments do not pay CIL if they meet certain criteria. They may be eligible for both mandatory relief and discretionary relief.
Conditions apply in order to qualify for exemption from the Community Infrastructure Levy. If these conditions are broken the exemption can be cancelled and the CIL charged retrospectively. Builders and developers who believe a project is exempt should check with their local authority as to what these conditions are when planning work.
What does the CIL Pay For?
Local authorities must spend the proceeds of the CIL on the development of their area. However, within that, they can decide what infrastructure is needed within certain parameters.
The CIL can be used to fund a wide range of infrastructure including transport, flood defences, schools, hospitals, and other health and social care facilities. It can be used on amenities such as play areas, open spaces, parks, green spaces, cultural and sports facilities, healthcare facilities, academies and free schools, district heating schemes and police stations and other community safety facilities.
How it is Calculated
In order to be able to charge a Community Infrastructure Levy a local authority must first agree to introduce the CIL system. They must then create what is known as a charging schedule for their area. A local authority that charges a CIL is known as the charging authority.
In creating the charging schedule the authority must outline what new infrastructure they will create and how the CIL they propose to charge will allow this to be provided. They must put together a detailed plan with a draft charging schedule covering this and they must provide evidence to support it. The plan is then put out for consultation and is then examined by an officially appointed examiner before it can be adopted.
The charging authority must specify in their charging schedule what types of development are liable for the levy and the relevant charging rates for each development type. Levy rates are expressed in pounds per square metre of new development.
How much is the Levy?
When deciding the levy rates, a local authority is expected to strike a balance between what money is needed to support the development and the potential effect on the viability of developments.
Most local authorities operating a Community Infrastructure Levy have differential rates for residential developments, retail/commercial developments and other kinds of development. Residential areas may be divided into zones with different CIL rates for different zones. Different rates may also be set for different sizes of development. Charging authorities are also able to set a zero CIL in some parts of their area and for some types of development.
In some cases, local authorities are able to accept completed infrastructure or land in lieu of a monetary CIL payment.
It is often (though not necessarily) the case that areas with higher land values charge a higher CIL rate than those with lower land values.
How the Community Infrastructure Levy Works
Where a Community Infrastructure Levy is charged it is payable both on developments which require planning permission and those which are carried out under permitted development rules.
The Community Infrastructure Levy and planning permission: When applying for planning permission applicants must submit an Additional CIL Information form (Form 1) alongside their planning application. Planning authorities may refuse to validate a planning application if this information is not provided.
The information on Form 1 will be used to assess whether a CIL is payable and what it will be.
Community Infrastructure Levy exemption: Developers and builders who believe that their development qualifies for exemption from CIL must apply for an exemption before work starts.
Liability to pay a Community Infrastructure Levy: The liability to pay a CIL falls on the landowner. However, this liability can be transferred to other parties to property development through the assumption of liability process.
Liability to pay a Community Infrastructure Levy occurs as soon as a new development commences. The developer must file a Commencement Notice and the authority will issue a Liability Notice. The CIL may be paid in instalments or on a phased basis if this has been agreed upon at the outset.
Community Infrastructure Levies are collected by the collecting authority. This will often though not necessarily be the same as the charging authority.
Community Infrastructure Levy surcharges: Local authorities are able to impose a CIL surcharge (typically 20%) if a CIL is not paid when it should have been.
Lastly, it should be noted that developers may be asked to provide contributions for infrastructure in several ways. This may be by way of the Community Infrastructure Levy, planning obligations in the form of section 106 agreements and conditions that are attached to the granting of planning permission.