Back to basics – the Community Infrastructure Levy (CIL)

Although the Community Infrastructure Levy (CIL) has been with us for over a decade, it continues to feel new (perhaps because the government keeps changing it) and, thanks to the regime's complexity and rigidity, can throw up some unwelcome surprises. The recent case of Stonewater (2) Ltd v Wealden DC – in which an affordable housing provider was held not to benefit from social housing relief despite its intentions to build out a 100% affordable housing scheme – is just one example. There are many others. The case acts as a stark reminder that CIL is a potentially significant cost which, if unaccounted for, can seriously jeopardise the viability of a scheme. This will only be exacerbated for some developers by the Residential Property Developer Tax when it comes into effect on 1 April 2022 and the Building Safety Levy which will come into force in 2023 – for more information on these see our blog posts here and here. Whilst the Planning White Paper proposed a new Infrastructure Levy to replace both CIL and section 106 obligations, with the government's planning reforms currently on pause and subject to review, CIL is likely to be with us in its current form for some time yet.

In this first of two Back to Basics blogs we take a look in simple terms at the CIL regime, focusing on what its intended purpose is, how rates are set, how the levy is calculated, and how it is collected. In the second blog we will look at exemptions, credits, payments in kind, reliefs and enforcement.

What is CIL's intended purpose?

CIL is a charge on new development above a certain size that is designed to help fund local and sub-regional infrastructure identified in development plans. CIL is charged by the "charging authority" for the area, for example a district or unitary authority. In London, the Mayor of London also charges CIL (currently Mayoral CIL2, which is being used to fund Crossrail 1 (the Elizabeth Line) and Crossrail 2). So, London developments are subject to both borough and Mayoral CIL.

How are CIL rates set?

CIL is levied on the net internal area of development and is calculated on a pounds per square metre basis. Charging authorities can set different rates based on geographical area, intended uses of development, intended gross internal area of development, or the number of dwellings/units to be provided under a planning permission. CIL is only payable if a charging authority has consulted on and approved a charging schedule setting out its CIL rates, and the charging schedule been published on its website.

When setting the CIL rates, charging authorities must have regard to the total cost of infrastructure requiring funding from CIL, other sources of funding available, and the potential effect of CIL on the viability of development in the area. Charging schedules must be informed by "appropriate available evidence". All charging schedules go through a consultation and examination process and are required to be kept under review.

How is CIL calculated?

CIL is calculated at the time planning permission "first permits development". Planning permission first permits development on the date it is granted unless it is a phased permission in which case it is calculated from the day of approval of the last reserved matter (if an outline permission) or the day final approval is given under any pre-commencement condition. An outline permission that is not phased first permits development on the day of final approval of the last reserved matter.

Collecting CIL payments

The collecting authority calculates levy payments and is responsible for ensuring that the levy is duly paid. The charging and collecting authority are usually the same body, except in London, where the London boroughs collect Mayoral CIL on behalf of the Mayor.

Procedural steps for collecting CIL

Set out below are the key procedural steps in the collecting process. The steps focus on the actions that need to be taken by the developer and assume that exemptions etc. do not apply.

• Applicants for planning permission should include a completed Additional CIL Information form with their application.
• Where planning permission is granted by a general consent (e.g. permitted development), the developer or landowner should submit a notice of chargeable development to the collecting authority before any development authorised by the general consent commences.
• The developer, landowner or another interested party should assume liability for the levy by submitting an assumption of liability form. This tends to be submitted before planning permission is granted. Assumed liability can be withdrawn any time before development commences or transferred to another person after commencement but before the final payment of CIL is due. Where no one has assumed liability, CIL is apportioned in default between those persons having a material interest in the land (freehold or leasehold term of 7+ years) at the commencement of development.
• The collecting authority then serves a liability notice which sets out the charge due and details of the payment procedure. The liability notice is served on the applicant for planning permission/reserved matters approval or the person who submitted the notice of chargeable development (as relevant), the person who assumed liability (if any), and each person known to the authority as an owner of the relevant land.
• A commencement notice must then be served on the collecting authority no later than the day before development commences. The commencement notice identifies the relevant liability notice and states the intended date of commencement of development.
• Finally, the collecting authority serves a demand notice on each person liable to pay CIL, which, amongst other things, states the amount payable and the date or dates on which payment is due.

It is important to appreciate that authorities are as bound by the inflexibility of the regime as developers. Unlike contributions made via section 106, the amounts charged and when payments fall due are not up for negotiation. So, whilst the system offers greater certainty over cost exposure, it can lack the versatility to respond to development-specific circumstances resulting in seemingly illogical outcomes as so happened in Stonewater.

As mentioned earlier, the second blog in this Back to Basics series on CIL will look at exemptions, credits, payments in kind, reliefs and enforcement. If you would like to discuss this or any aspect of CIL, please contact us.

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