How Will The Community Infrastructure Levy Work?
The broad framework for introducing the Community Infrastructure Levy was contained in the Planning Act 2008. The Government has now published detailed proposals for implementing CIL which will come into force in April 2010. CIL is a way of collecting financial contributions from developers to pay for local infrastructure such as roads, schools and flood defences. The proposals are currently out for consultation and interested parties should make their views known before 23 October 2009.
CIL is optional
Local planning authorities will have the option to charge CIL or to continue to use existing section 106 planning agreements to obtain developer contributions to local infrastructure. It is important to note that local planning authorities will be empowered to charge CIL but are not required to do so and they can choose not to implement it if they prefer. One of the factors that will influence a local planning authority’s decision on whether to implement CIL is that there should be an up to date development plan for an area before CIL can be charged in that area.
How will CIL be calculated?
The amount of CIL will be based on a formula relating to the size and type of development being undertaken. The development plan for the area should set out what infrastructure is needed and its likely cost. The local authority should then consider what other sources of funding are available, for example central Government funding. Any gaps in funding should be identified and this will determine how much money needs to be raised through CIL. There will also be an assessment of local development viability to make sure that the amount of CIL being charged does not make development in the area economically unviable. This will be particularly important, for example, in regeneration areas.
The local authority will prepare a charging schedule which will be a new type of document in the Local Development Framework. The charging schedule will be rigorously tested through public consultation and a public inquiry before an independent person (ideally from the Planning Inspectorate) whose report will be binding on the local authority. The charging schedule will allocate the amount of CIL to be raised to each of the main classes of development and the charge will be expressed as a cost per square metre of floorspace.
When will CIL be paid and by whom?
CIL will be paid on commencement of development by the developer or, in default, by the landowner. The Government is proposing a 28 day payment window although they are also considering whether payment by installments might be helpful in terms of cashflow. Where development is phased, it is intended that each phase should pay CIL separately. Late payment will attract fines and interest and possibly the requirement to stop the development.
CIL will be levied on buildings rather than development. There will be a de minimis threshold of 100 square metres below which CIL will not be due and householder development will be exempt. In practice therefore, most although not all, permitted development will not be liable for CIL. A new definition of development and of a building for CIL purposes will be introduced by the Government to avoid confusion.
CIL will be charged on most types of residential, commercial and industrial buildings but not on those types of buildings where the public would not be expected to go ie electricity substations or wind turbines. There will be an exemption for development by charities for charitable purposes. The Government is also considering whether there should be a discount for affordable housing developments.
What can CIL contributions be spent on?
CIL contributions are to be spent on the provision of local and regional infrastructure. The monies should be used to fund the infrastructure needed as a result of the development coming forward in the area rather than to remedy any existing deficiencies in infrastructure provision. The definition of infrastructure is to be deliberately kept wide so that local planning authorities can use the monies to pay for whatever type of infrastructure is needed for their particular area. DCLG have made it clear however that affordable housing will not be funded by CIL and will continue to be delivered through negotiated planning agreements.
Benefits of CIL
The main benefit of CIL from a developer’s point of view is that the fact that it will be based on a clearly set out formula should make it easier to predict how much a developer would be asked to contribute for different sizes and types of development on a particular site. It should be a more transparent and therefore fair system as everyone building a similar scheme in the same local authority area should be charged a similar amount.
For local authorities it should enable them to collect contributions across the vast majority of developments in their area, raising the amount of money that they ultimately collect and spreading the cost of infrastructure more evenly across all new qualifying development. It will also make it easier to fund larger pieces of infrastructure that serve more than one local authority area as Councils will be able to pool contributions from CIL in order to work together to deliver regional infrastructure.
This article was first published in the Property Law Journal on 28 August 2009.
