Why was it introduced?

Back in 2008, The Planning Act (2008 Act) provided for a discretionary planning charge called the Community Infrastructure Levy (CIL). The aim of the levy was to raise funds for the provision of community infrastructure such as roads, schools, medical, sporting and recreational facilities that would be needed to support communities living in new developments.

On 6th April 2010, The Community Infrastructure Levy Regulations 2010 (SI 2010/948) came into force and since then, more and more authorities have elected to charge the levy. As at October 2013, 27 authorities were collecting the levy and more than 50 charging authorities had reached the “Preliminary Draft Charging Schedule” stage.

The intention is that every authority should charge the levy and CIL should replace the use of the Section 106 agreement between the local authority and the developer to address infrastructure requirements. Initially, the phasing out of ad hoc Section 106 Agreements was to be completed by April 2014. A set of new amendments, discussed below, has extended this deadline until April 2015.

However, it is anticipated that affordable housing will continue to be negotiated through planning obligations, as the provision of affordable housing on the development site is important for securing mixed communities. The Government considers that affordable housing is a legitimate planning requirement that would satisfy regulation 122 of the CIL Regulations 2010. This requires the obligation to be necessary to make the development acceptable in planning terms, directly related to the development and fairly and reasonably related in scale and kind to the development.

Since implementation, there have been numerous amendments which have attempted to make the operation of the CIL more equitable and flexible, the most recent being the 2014 Amendments which came into force on 24th February 2014.

This piece of legislation is, effectively, a work in progress and the latest amendments sit in the middle ground between the ad hoc Section 106 Agreement approach and the initial, rather prescriptive, CIL system.

CIL – The Basics

Who sets and charges CIL?

The local authority responsible for granting planning permission will be deemed the “Charging Authority” for the purpose of the 2008 Act. The Charging Authority charges and determines the rates payable and publishes them in a charging schedule alongside the development framework for the area.

The schedules are available on the websites of Charging Authorities, some of which provide a calculator service to enable potential payers to estimate the charge. These calculators may be useful for early stage assessment of the costs of a development and guidance on their use and the information required is generally provided on the charging authority websites.

How is it calculated?

CIL is charged on the net additional gross internal floor area of a development. Rates are expressed in £ pounds per square metre.

The calculation is determined on the date that planning permission is granted. There are some exceptions to this, particularly in respect of phased permissions, but the general approach is to set the date for calculation on the day that permissions are finalised.

When is it payable?

Where the development is deemed to be a “Chargeable Development”, it will be caught.

Chargeable Developments are new buildings and enlargements to existing buildings which exceed 100 square metres of gross internal floor space. They are developments which have been expressly granted planning permission by the local planning authority, the Secretary of State or automatically by The Town and Country Planning (General Permitted Development) Order 1995.

The charge is due when the development commences. At that point, the developer must issue a commencement notice to the charging authority (Form 6: ‘Commencement Notice’) and the owners of the affected land, following which the Charging Authority will send a “Demand Notice” to the liable party.

Who pays?

According to the regulations, the paying party will be the one who “assumes liability”. This will tend to be the developer.

At planning permission stage, the applicant is required to send a Form 1: ‘Assumption of Liability’ to the collecting authority. On the face of it, this seems quite arbitrary as there are bound to be ongoing negotiations between land owners and developers as to how the charge will be met and by whom. The liability to pay can be transferred to another party further down the line by submitting a further Form 2: ‘Transfer of Liability’.

It will therefore be useful to enter into discussions early on about who will pay the CIL to avoid the additional paperwork required to change the paying party.

Who is exempt?

New buildings or enlargements to existing buildings which are below 100 square metres will be exempt.

Other exemptions include:

  • minor development exemption
  • mandatory charitable relief
  • discretionary charitable relief
  • mandatory social housing relief
  • discretionary social housing relief
  • exceptional circumstances relief
  • self build exemption (for a whole house)
  • self build exemption (for a residential annexe or extension).

If exemption is being claimed, then the applicant must submit a form specific to the relief or exemption they claim. For example, if you are claiming exemption on the basis of charitable relief, social housing relief or exceptional circumstances relief then you must submit Form 2: ‘Claiming Exemption or Relief’.

Generally, relief cannot be granted after development has commenced, so it is very important, at the outset, to consider whether you may be able to claim relief. Talk to your solicitor about the formal relief claiming process.

2014 Amendments: what’s changed?

The latest amendments introduce a more flexible approach to the CIL although a move towards a more individual assessment of a development. Notable changes include:

  1. a new category of exemption for self-built houses and residential annexes and extensions
  2. extensions to relief for social housing
  3. more flexibility for Charging Authorities to set rates in accordance with the size of the development or the anticipated number of units or homes
  4. a requirement on authorities to strike an appropriate balance between the charges they levy and the impact that the charges will have on the viability of development in their area (addressing CIL’s deterrent effect)
  5. delaying the effective deadline by which Charging Authorities will have to implement CIL, thus extending the use of section 106 obligations until April 2015 (one year’s extension)
  6. extension of the “Existing building/vacancy test” from 12 months to three years, so that space which has been in continuous use for any six months in the three year period prior to the grant of planning permission will be excluded from the calculation of square metres, for the purpose of the CIL calculation
  7. phasing provisions for CIL payment, in order to accommodate more complex developments
  8. ability to agree payment in kind through infrastructure, rather than making the CIL payment.

At present it is not clear whether there will be more amendments to the Regulations. However, it seems as though the new amendments are a positive change for developers and other potential payers of CIL. The payment methods have been varied and the exemption categories have increased. One thing is certain though, CIL is here to stay.