New for old

The Community Infrastructure Levy (CIL) was introduced by the Planning Act 2008 (PA) and the regulations came into force on 6 April 2010. It is a new charge which local authorities in England and Wales will be empowered, but not required, to levy on most types of new development in their areas. The proceeds of the levy will provide new local and sub-regional infrastructure to support the development of an area in line with local authorities' development plans. Local planning authorities (LPAs) can therefore tax the grant of a planning permission (PP) (full or reserved) for residential or commercial development. Approximate charge is expected to be £160 per square meter (sqm) in a Central London office space.

Most regularly used buildings will be liable to pay CIL although a change of use with no increase in floor space will be exempt. For non-residential development, however, there will be a threshold of 100sqms below which CIL will not be payable.

CIL becomes payable on a reserved matter after the 6 April even if an outline planning permission was obtained before this date.

CIL aims to scale back on the section 106 planning obligations. Although it is too early to conclude whether this will be the case, developers may have to budget for both section 106 and CIL.

Most LPAs may implement CIL by 2014, but it is difficult to assess the impact as it is discretionary for the moment.

How does CIL work?

CIL is a voluntary fixed form of charge and each LPA decides whether the introduction of CIL is appropriate for their area depending on the surrounding circumstances. CIL will normally be paid by the owner of the relevant land unless another party volunteers to pay for it by assuming liability. Payment becomes due immediately upon commencement of development. The LPA decides levels of charge and a charge is generally made for developments over 100sqm as defined by section 209 of the PA. It is payable at a rate per sqm and will be levied on the net additional floor space as a result of the development. Payments can be made on account or in instalments. Liability to pay CIL for developments will arise only when the LPA has implemented a charging schedule based on the most up to date plan and this has been consulted on for consensus. CIL will not be triggered unless LPAs have adopted a CIL development plan policy. These policies will be reviewed by an examiner whose report is binding on the local authority. Rates will be based on actual and estimated costs of infrastructure required to support the development in a specified LPA area and would differ according to the area and the type of development. The PP will determine the number of chargeable units and the charging schedule will determine the rate per sqm. Total cost is a multiple of these two taking into account the inflation at any given time. The charge is reviewable as part of the local framework process.

LPAs have draconian enforcement powers. Authorities could choose to waive or abate the charge under exceptional circumstances depending on the validity of the reason given for the exception. An example could be where the landowner cannot afford to pay the required amount. Applications for relief will be considered on an individual basis on the fulfilment of certain set criteria.

LPAs will require additional information from proprietors of land to determine the appropriate CIL liability for residential development when considering planning applications. There may be a reduced charge for buildings that will be demolished and it is vital this information is supplied with the initial application form.

Full relief on CIL is available to proprietors of charities where the development will be used for charitable purposes and also for investments towards charity. Similarly, developments for social housing are exempted from liability.

Most developments under a general permitted development order will not be liable for CIL though there are exceptions.

Preparing for the regulations

It may be a while before the CIL regulations are implemented in practice. The following issues could be relevant:

a) Ensure that CIL is factored into contractual documentation if applicable.

b) Consider whether there will be any financial advantage in bringing forward a planning application to pre-empt CIL.

c) Consider whether changes to section 106 will affect any planning applications.

d) Check whether CIL has been implemented in an area where your advice may be sought.

e) Avoid double charging under CIL and section 106 if possible.

f) Who will be liable to pay CIL?

g) Is an indemnity payable by the paying party to the other?

h) Do parties require advice on the serious consequences of non-payment?

The government will be providing guidelines and support for LPAs for establishing and operating CIL including effectively using CIL and section 106 simultaneously.

CIL will be registered as a local land charge. The levy aims to strike a balance between extracting value from developers on the grant of planning permission and ensuring that the public body does not make the development unviable what appears to be in a lawful and fair manner.

It is still early days to comment on the success of CIL as a contemporary and a successor to section 106. LPAs have to prepare the charging schedule which has to be tested in a public examination.

CIL was conceived at a time when land and capital values were rising and so may not be a viable option now. Many LPAs may not adopt CIL owing to cut back on public expenditure unless they have exceptional circumstances such as in key regeneration or growth areas.

The future of CIL is doubtful if the Conservatives win the election, as they are likely to abolish it. It is not certain what they may introduce in its place but for the time being planning obligations may continue.

With all the impending 'ifs and buts', CIL is a dark area for practitioners and they may need to be prepared for the outcomes whatever that may be.