The Community Infrastructure Levy (“CIL”) was brought in by the Planning Act 2008 and implemented to take effect from 6 April 2010 through the Community Infrastructure Levy Regulations 2010.
What is the CIL?
The CIL is a discretionary planning charge which can be imposed by Local Authorities in England and Wales to raise money for local infrastructure to support new developments.
The charge can be made by the Local Authority to a developer of land and the cost of the charge is based on the size of any new development which is commenced whether planning permission is required or not.
Is a CIL being charged?
While the CIL regulations are currently in force, a charge will only be payable if the relevant Local Authority in which the development is taking place has published a Charging Schedule which sets out the rates for their levy.
As at 1 May 2012 around 40 Local Authorities have published CIL Charging Schedules and of these, 6 are currently charging the levy. All Local Authorities are being encouraged to implement the CIL by 2014.
Which developments require payment of a CIL?
If the relevant Local Authority has a CIL charging schedule in place, the following developments may be liable for a CIL:
1. A development which extends any existing building by 100m² in floor space;
2. The creation of any new building or buildings which total over 100m² in floor space;
3. The creation of one or more new dwellings (not dependent on total build area);
In calculating whether there is over 100m² of newly built development, the following will be taken into account:
a) Theareaof any floor spacewhich is demolished in the development can be deducted from the grosstotal areafor the development in order to establish whether the development is over 100m².
b) Any buildings into which people only access intermittently and then only access for the purpose of inspecting or maintaining fixed plant or machinery are excluded from the total calculation.
c) For an existing building which is not being extended, any increase in the interior gross area is excluded from the calculation.
How much is the CIL?
Calculation of the CIL is in accordance with the relevant Local Authority Charging Schedule and the total levy will be the relevant rate multiplied by each square metre of the total development over 100m².
The relevant rate can depend on the use of the land (i.e. residential, retail, office etc) or could be uniform for all developments. The Local Authority Charging Schedule will specify the levy for each band.
Example:
Developer A obtains planning permission to construct a new retail unit in Sherwood with a total floor space of 1,000 square metres.
Pursuant to Newark and Sherwood District Council’s Charging Schedule, theSherwood rate for Class A retail use is £100 per square metre.
The levy will therefore be the rate multiplied by each square metre over and above 100m²:
£100 x 900 square metres = £90,000 CIL.
Who is responsible for payment of the CIL?
A developer or any other person can assume responsibility for payment of the CIL by submitting to the Council an “assumption of liability notice”.
Otherwise, default liability will be established on the basis of who has a “material interest” in the land when the development is commenced. This can be a leasehold or freehold owner of the development land.
When notice of commencement of the development is given to the Local Authority, the Local Authority will serve a demand on the relevant person or persons indicating the amount payable and the date payment is due by. Local Authorities may allow for instalment or deferred payment and this will be specified in the Charging Schedule.
If the CIL regulations are breached and the levy is not paid, the Local Authority may apply surcharges to the CIL and/or commence enforcement procedures such as serving a Stop Notice. The Local Authority may also bring a claim against the developer with a maximum fine of £20,000 on summary conviction.
Relationship of CIL with Section 106 Agreements
The CIL is not designed to replace Section 106 Agreements. The introduction of a CIL may, however, curtail the use of Section 106 Agreements by Local Planning Authorities.
Section 106 Agreements will still need to be negotiated between a developer and the Local Planning Authority in order to obtain planning permission. However, Section 106 Agreements should no longer be used to impose tariffs to fund infrastructure. Rather, the CIL Regulations 2010 state that a planning obligation by way of a Section 106 Agreements should only be used if:
a) It is necessary to make the proposed development acceptable in planning terms;
b) It is directly related to the proposed development; and
c) It is fairly and reasonably related in scale and kind to the proposed development.
Conclusions
The CIL represents an additional financial consideration to be taken into account by developers of land in the financial planning of any development scheme. Similarly, commercial tenants should be aware of the provisions relating to the CIL and be mindful that a developer landlord may try to recoup these costs when granting a lease.
Therefore, the following questions should be taken into account by any developer or commercial tenant in a land transaction:
1. Has the Local Authority of the development land published a CIL Charging Schedule?
2. If the development has already began, was the CIL Charging Schedule published when the planning permission for the development was granted?
3. If the CIL applies, what are the relevant rates for the type of development in question?
4. How large is the development and will there be a new floor space built which exceeds 100m² or will a new dwelling be created?
5. What is the cost of total CIL and who is responsible for paying it?
6. For completed developments, and if the above applies, has the CIL liability been discharged by the owner of the land at the commencement of the development?
Please note that this information is provided for general knowledge only and therefore specific advice should be sought for individual cases.
For further information, please contact Philip Shotter at or Paul Jagger at
