Summary and implications

CIL is on the way and its impacts need to be considered now. Two local authorities (Shropshire County Council and Newark and Sherwood District Council) will have charging schedules in force on 1 January 2012 and other local authorities follow closely behind.

The Mayor of London’s CIL proposals will be examined in public by an Inspector on Monday 28 November 2011. The Mayor intends that CIL will be payable on most new development in London from April 2012 with the aim of raising £300m for the delivery of Crossrail.

As a result it is vital that landowners, developers and professional advisers consider the potential implications of CIL now.

What is CIL?

CIL is a development tax payable in respect of development authorised by planning permission in England and Wales. It was introduced by the Planning Act 2008 and CIL Regulations 2010. However, its introduction is dependent on the planning authority for the particular area adopting a CIL charging schedule.

CIL applies to various types of planning permission including:

  • planning permissions granted on a planning application or appeal;
  • a development consent granted by the Infrastructure Planning Commission for Nationally Significant Infrastructure;
  • permitted development rights; and
  • local development orders, simplified planning zones and enterprise zone schemes.

CIL is to be collected for the following infrastructure:

  • roads and other transport facilities;
  • flood defences;
  • schools and other educational facilities;
  • medical facilities; and
  • sporting and recreational facilities.

The Government are currently consulting on including affordable housing within this framework.  

Charging authorities

Various authorities will be charging authorities, the main ones are local and regional planning authorities. The main point to note is that an area may have more than one charging authority. For example, in London boroughs, the local authority and the Mayor of London will both be charging authorities entitled to charge CIL.

Charging schedules and calculating CIL

Charging schedules are to be produced by each charging authority and will set out rates payable in respect of net increases in floorspace if:

  1. the development has an increase of 100 square metres or more of gross internal floor space; or
  2. it involves the creation of any additional dwelling even when that is below 100 square metres.

Demolished floorspace or floorspace resulting from a change of use will only be disregarded from the CIL calculation where it has been in continuous lawful use for at least six months in the 12 months prior to the development being permitted.

Relief from CIL can be granted on the grounds of:

  • charitable relief;
  • social housing relief; and
  • exceptional circumstances relief.

A charging schedule can only charge differential rates on the basis of different rates applying to different zones or different uses. CIL payments will be subject to an indexation.

Paying and collecting CIL

Liability for the payment of CIL falls upon the owners of the land (freeholders and lessees with a lease which has an unexpired term of seven years or more) unless a person lodges an assumption of liability notice accepting full liability for CIL. However, if that person defaults, default liability reverts to any other owners of the land. In addition, the assumption of liability notice can be withdrawn prior to commencement of the chargeable development or transferred before the final payment is due.

Where the landowners are liable, payment is apportioned by them according to a calculation based on the market value of their interest.  

CIL (once in effect for a particular area) will be payable on commencement of the chargeable development.

Only phased outline planning permissions benefit under the legislation from phased payments (unless the charging authority has an instalments policy, which will only apply if someone has assumed liability).  

The CIL Regulations allow charging authorities to accept land transfers as payment in kind in lieu of the whole or part of the CIL.

Ongoing consultation

The DCLG is currently seeking views on proposals to:

  • implement neighbourhood funds – the Localism Bill provides for the detail of how neighbourhood funding will work to be covered in regulations and guidance. The consultation proposes an approach that sets out the main requirements in regulations supplemented with statutory guidance;
  • allow receipts to be used to provide affordable housing;
  • provide transitional provisions to allow fair operation of the levy in Mayoral Development Corporation areas;
  • require charging authorities to report more openly and regularly on receipts and expenditure to improve transparency and understanding of the contribution that developers are making and how those funds are used; and
  • add new Development Orders to the list of developments that may be liable for a charge.

DCLG have also published draft regulations for consideration. The consultation period closes on 30 December 2011.