What is the Community Infrastructure Levy (CIL)? – A recap
The CIL was introduced under the Planning Act 2008 and the CIL Regulations 2010, which came into force in April 2010. CIL is a non-negotiable tax charged by local authorities on new developments. Essentially, this is a tax on developers and landowners with funds used to improve local infrastructure in and around the new development. New developments that create an additional floor space of 100 square metres or more, or involve the creation of new dwellings, may be subject to the tax if the local authority has introduced a CIL charging schedule.

A developer or landowner only becomes liable to pay CIL if planning permission has been granted after a local authority’s’ introduction of the levy. Currently, CIL is a discretionary charge and is, therefore, being introduced in phases throughout the country. Presently, over 200 local authorities have either implemented the tax or are in consultation to do so.

Who pays

CIL attaches to and runs with the land and, therefore, the default position is that the landowner is responsible for paying, unless a notice of assumption of liability is served to the contrary.

When is it payable

CIL is calculated from the date that planning permission is granted and the charging authority issues a liability notice setting out the amount payable.  Payment must be made within 60 days from the start of the development. Alternatively, CIL can be payable in instalments if a charging authority has an instalment policy.   

Development includes any work of construction in the course of the erection of a building, including demolition, digging of trenches, laying of underground mains and pipes, any operation carried out in connection with the construction of any roads or any change use that could be classed as a material development.

If no assumption of liability notice has been served, and the collecting authority has received a commencement notice, CIL is payable in full by the landowner immediately on the intended commencement date.

Social housing exemptions

A mandatory social housing relief from CIL applies to developments and properties that are being used for traditional tenures of affordable housing, including most social rent, affordable rent and shared ownership. A 100% relief can be granted to a registered provider, but the local authority has the power to clawback the CIL contribution that would have been paid within seven years from the chargeable development (or seven years from the date the dwelling was first let), if the property is no longer used for social housing, including when a shared owner staircases to 100%.

A registered provider needs to have assumed liability (by serving an Assumption of Liability Notice) on the charging authority and submitted the application for exemption and received a decision from the charging authority before the commencement the chargeable development.

There is also a discretionary social-housing relief, which applies to discounted rent and discounted sale properties as well as other non-traditional affordable housing tenures.

The reforms

Reforms were introduced on 1 September 2019 under the Community Infrastructure Levy (Amendment) (England) (No 2) Regulations 2019 (SI2019/1103) (the “2019 regulations”) and included the following:

Starter homes are currently not exempt under the mandatory affordable housing relief. It is thought that the Ministry of Housing, Communities and Local Government will introduce starter homes as a mandatory affordable housing relief when the Starter Home Regulations are introduced (note that starter homes will be the only “non-traditional” form of affordable housing that will be included in the mandatory relief). If starter homes are included in development proposals in the meantime, these may attract CIL, if a discretionary relief has not been adopted by the local authority.

Calculation under the reforms has now been simplified. Previously, this has been a more complex formula-based calculation. Although the formula remains the same, this is now contained in Schedule 1 to the 2019 regulations, which is easily accessible and now includes helpful scenario-based formulas.

Local authorities and the spending of CIL – Regulation 123 has now been removed. Previously, local authorities had to use CIL contributions to fund infrastructure projects subject to regulation 123 and known as the “123 list”. This also prevented a local authority from using more than five s106 contributions to fund a single infrastructure project. Now, a local authority can use both CIL contributions and s106 contributions to fund the same infrastructure projects. However, to balance the relaxation of these spending rules, local authorities are now required to disclose annual statements showing how CIL contributions have been spent.

Practical tips for registered providers

  • Planning applications – Registered providers should consider the potential for CIL at the outset of any proposed development scheme. CIL becomes payable on commencement of developments. If a registered provider is concerned about the obligation to pay the CIL liability in one go on a large site, it would be worth considering phased planning permission. In this case, each phase will be treated as a separate chargeable development and CIL will be payable on the commencement of each phase.
  • Who is responsible – It is important to appoint a member of your organisation to be responsible for serving and receiving the required notices at the right time and to monitor CIL. CIL is discretionary and although it may not have been introduced by the local authority at such a time that the development is being considered, this is subject to change. If CIL is introduced before planning permission is obtained, CIL will be chargeable and the necessary notices will need to be served. Notices may include the following:
    • Assumption of liability notice – Served on the local authority confirming who is liable to pay CIL if different from the landowner;
    • Liability notice – This notice is issued by the Local Authority at the time that planning permission is granted, or shortly after. The notice sets out the amount of CIL payable based on the floor space of the development considering any social housing relief that may be applicable.
    • Notice of chargeable development – Served on the local authority to confirm that they intend to begin development under a general planning consent;
    • Commencement Notice – Is to be served on the collecting authority no later than the day before the day on which the chargeable development commences;
    • Demand Notice – Served by the collecting authority on the landowner (or the person that has assumed liability) stating the amount of CIL that is payable and when;
    • Claim for relief/exemption – Importantly for registered providers, someone within your organisation needs to assume responsibility to claim the affordable housing relief, and finally;
  • Conditional contracts – Ensure CIL is a buyer’s unacceptable condition so you are not obliged to complete if the scheme is not financially viable because of CIL contributions.
  • Golden brick agreements and joint ventures – Watch out for provisions in the contract as to who pays CIL as the seller will have commenced development and the registered provider will only be taking ownership of the site once golden brick has been achieved.
  • Site investigations – The site investigations you undertake could amount to “commencement of development” and subsequently trigger payment of CIL for the landowner. If you are a landowner and have agreed to allow a buyer on to your land to conduct site investigations, it would be prudent to grant the buyer a licence, setting out exactly what investigations can be undertaken. Consideration should be made to include an indemnity that, should CIL payments become triggered, the buyer will pay.

Registered providers should watch out for this in licences from landowners and ensure that your site investigation works do not amount to commencement of development after obtaining planning permission. Additionally, ensure that there is an obligation on the landowner to mitigate its losses if CIL is triggered as it may be entitled to appeal with a right for you take over the appeal, if necessary, if you are on the hook for payment.

Further information

For help with understanding CILs or to find out more, please contact Lucy Worrall