Regeneration and development (whether residential, commercial or mixed-use) requires additional infrastructure to support it. The 'Community Infrastructure Levy' (CIL) is a new statutory planning tariff which – when it is introduced - will aim to ensure that a proportion of the cost of providing that infrastructure is obtained from landowners and developers. It replaces the much maligned (and now mothballed) proposed planning-gain supplement and will sit alongside measures such as s106 agreements, business rates supplements and (possibly, in the future) innovative measures such as tax increment financing.

A 'placemarker' has been set in the form of enabling legislation in the Planning Act 2008, although the detail of the CIL is contained in as-yet unpublished draft regulations (which we refer to here as the 'CIL Regulations'). What we can tell from the Planning Act, however, is the following.

What is CIL?

The CIL will be akin to a roof tax, or what developers know as the 'Milton Keynes Tariff'. It will sit alongside the existing s106 agreement system. The precise division of labour between s106 and CIL will be confirmed in the CIL Regulations, but informal consultation has suggested s106 agreements will deal with non-financial matters, site-specific issues and affordable housing, and CIL will deal with the balance.

Who charges CIL?

CIL will be charged by 'charging authorities'. These include local planning authorities, various councils, the Secretary of State, Welsh Ministers, and the Mayor of London. Where a development straddles the jurisdiction of one or more charging authorities, they can act together as a joint committee. This is in sharp contrast to the proposed planning-gain supplement, which would have been centrally administered by HM Revenue & Customs.

How is the CIL calculated?

The rates and formulae for CIL will be set locally by each charging authority (or joint committee), in the form of a 'charging schedule'. The charging schedule will reflect various factors, including uplifts in value, development viability and so on. The charging schedule will be vetted by independent examiners, and can be appealed by the CIL-payer.

Who pays the CIL?

The CIL will be paid by landowners, or 'developers'. Developers are defined as including anybody with an obligation to develop the land which is the subject of the CIL.

The CIL Regulations will provide for exemptions which will apply to particular types of charities and to institutions established for a particular charitable purpose that undertake development (the chief beneficiaries of which are likely to be housing associations).

When is the CIL paid?

CIL is paid when development commences. Development is broadly defined, and includes anything done to (or in relation to) an existing building or towards the construction of a new building. The CIL Regulations are expected to make provision for payments by instalment and/or in kind. The usual penalties will exist for failure to pay, evasion, etc, together with a power for charging authorities to stop development.

What happens next?

The government has indicated that the draft CIL Regulations will be circulated in Spring 2009, and that the CIL will not come into operation before October 2009. As soon as we have news of further developments in this area, we will let you know.