The Community Infrastructure Levy (CIL) is a charge, introduced by the Planning Act 2008, which local authorities can apply to development in their area. It is a tool to help fund and deliver the infrastructure needed to support development (for example, a relief road, community facilities, and school provision). To date not all local authorities have introduced CIL.
Before CIL can come into effect local authorities need to consult on, and approve, a charging schedule setting out its levy rates. Most new development which creates net additional floor space of 100 square metres or more, or creates a new dwelling, is potentially liable for the levy. However, many local authorities focus CIL charging on residential development and large-scale retail development, with less emphasis on employment development. Some authorities may seek a £0 CIL rate for local plan allocations, particularly where a high level of supporting infrastructure is already proposed as part of the development.
What is floor space?
For the purposes of CIL calculations floor space is the Gross Internal Area (GIA) of the building(s) being constructed. GIA is defined in accordance with the ‘RICS: Code of Measuring Practice’.
Relief or exemption from CIL
Some developments may be eligible for relief or exemption from CIL payments. For example affordable housing (including shared ownership) is eligible for 100 per cent relief, providing it remains as social housing for a period of seven years from commencement. Self-build homes and certain charitable developments are also exempt from CIL, subject to certain criteria.
What other deductions can be made to the CIL charge?
Where part of an existing building has been in lawful use for a continuous period of six months within the past three years, the parts of that building that are to be demolished or retained and form part of the development can be deducted from the total GIA for the development used to calculate the CIL charge.
Section 106 agreements v CIL
Section 106 agreements are put in place to make it possible to approve a planning proposal that might not otherwise be acceptable in planning terms. For example, a section 106 agreement might require a developer to fund site access improvements, to ensure that access will be safe once the development is completed. Additionally, a section 106 agreement may be required to secure sufficient affordable housing within a scheme. These requirements are specific to the site and the development.
CIL, however, is a general levy on all development included in the local authority’s charging schedule, and is designed to raise funds for infrastructure needed as a result of an increase in development in the wider local authority area. As such local authorities must identify the total cost of infrastructure they wish to fund wholly or partly through the levy. This will be based on appropriate evidence, including the authority’s Infrastructure Development Plan.
As CIL does not address scheme specific requirements, there will often be situations where a section 106 agreement is required on schemes which also attract a CIL payment.
CIL and Viability
In many cases a local authority’s section 106 requirements, such as affordable housing provision or financial contributions towards infrastructure, can be reduced if it can be demonstrated that they will make a scheme financial unviable. However, in the case of CIL the amount to be paid is fixed and cannot be challenged.
Implications for developers
When considering the development potential of a site it is key that the financial implications of CIL, along with any potential section 106 requirements, are fully understood.
It is also noted that the Levelling-up and Regeneration Act 2023 introduced the provision for an Infrastructure Levy (IL), which will replace CIL and most Section 106 contributions. This will be a locally-set, mandatory charge levied on the final value of completed development. IL will prevent developers from negotiating down the amount they contribute when bringing forward new projects. There is no indication of when IL will be introduced and it is yet to be seen if the new regime will be simpler as intended, or will create further uncertainty.
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