The concept of the Community Infrastructure Levy (CIL) was introduced in the Planning Act 2008 which came into force in England and Wales on 6 April 2010. The purpose of the levy is to fund infrastructure and replace the old system of planning obligations for roads, recreational facilities and schools (etc), to support the development of the area. Over seven years on there are still a number of Local Planning Authorities who are yet to have an adopted CIL Charging Schedule, but the majority of those are looking to adopt CIL.
Sarah-Jane Williams, an Associate in our planning team, reflects on the levy over the last 7 years and what we have learnt.
“Ever since CIL was introduced there have been rumours that it would be abolished, but it appears to be sticking around for now. Last year the government published an independent report on the effectiveness of CIL which highlighted concerns with the system, namely that the CIL is not delivering the governments original objectives of providing a more transparent and faster method of collecting contributions towards infrastructure caused by the impact of development. In the Chancellor’s autumn statement (22 November 2017) Local Authorities were encouraged to explore the idea of a Strategic Infrastructure Tariff, in addition to CIL. Whilst it is yet to be seen how such new tariffs would work it is understood that developers would have to baseline their infrastructure contributions in the values they pay for land. HM Treasury are consulting on the tariff together with ideas to reform CIL so as to speed up the system and have mooted the idea of removing the restriction on the pooling of S106 contributions on a single piece of infrastructure. At this stage it is difficult to see how a new tariff would assist in speeding up the system.
We deal with clients who have opposite views on CIL
Some have welcomed the levy due to the certainty it provides. Unlike section 106 agreements, where contributions can vary substantially from site to site, the levy provides everyone with a level playing field. CIL is charged at a standard rate per square metre, and is non-negotiable. This has also assisted investors when making decisions as to the viability of sites.
Others are not supportive of CIL in that it does not provide the certainty as to when the infrastructure for which specific CIL payments are paid is to be provided, whereas S106s used to provide that specific funds for specific infrastructure had to be utilised within a specific time frame, usually 5 or 10 years, and if not used it would be returned to the developer.
CIL comes with a health warning as we are seeing more and more appeal decisions where people are failing to correctly comply with the CIL regulations. It is essential that developers complete and submit the correct forms and notices before any development takes place on site. Following a number of recent appeal decisions it is also sensible to open a dialogue with the Local Planning Authority (‘LPA’) to ensure the forms are received by the LPA before work commences on site. Failure to do so may mean that you may not benefit from any reliefs you apply for, you may lose any opportunity to pay by way of instalments and additionally you may have to pay surcharges on top of the levy itself. Not following the correct process can be an extremely costly exercise and should be avoided.”
Community Infrastructure Levy – considerations for Developers
S106 agreement v CIL
In areas where CIL has not yet been adopted you may be faced with a choice between a S106 agreement or later CIL. Check the Local Authority’s draft charging schedule and work out whether you would be better off under CIL with the exemptions (should you qualify).
Timing is key
It is essential to secure relief before development begins. Make sure you complete the correct CIL forms,the Local Planning Authority receives the correct forms and grants relief before any development begins. This will avoid any loss of relief and costly surcharges.
Assess the entire development
Make sure you undertake a thorough review of the development site to ensure that you plan, apply for, and obtain, everything you are entitled to under the CIL regulations – before you lose the right to claim such credits / reliefs by demolition / commencing development.
Life of the development
Think about what may happen in the future and be aware that any of the reliefs you obtain could be clawed back:
- Think about the affordable housing products your site offers. CIL can be clawed back from the developer within 7 years should a property no longer qualify for Social Housing Relief where relief was initially obtained eg. Shared ownership dwelling staircased to 100%.
- Charitable Relief can also be clawed back within 7 years where the owner ceases to be a charitable institution or uses the building for an ineligible use.
Link with property transactions
If you are buying part of a development site make sure the transfer and contract deals with CIL and the assumption of liability. It may be necessary to apportion liability or you may wish to seek an indemnity. Furthermore it is advantageous to provide terms in your contract preventing the other party from commencing development until a specified date, or other trigger, so as to allow for each party to complete the correct CIL forms and apply for the correct exemptions.
Reliefs from CIL
- Social Housing Relief is available for qualifying dwellings. But only certain types of tenancy are covered, so it is essential to understand what counts as social housing for the purposes of the regulations.
- Charitable Relief is available where the land is owned by a charitable institution and the development will be used wholly or mainly for charitable purposes; but the exemption must not constitute a state aid.
Community Infrastructure Levy – how we can help
To ensure viability of new development and, ultimately, to provide the best quality developments for our communities, it is essential that housing associations and developers get CIL right, the first time around. When purchasing sites in advance of development we would encourage you to openly engage with landowner at the earliest opportunity so as to ensure that any necessary clauses dealing with CIL are incorporated into the contract for sale.
Preparation for CIL is key and too often we are seeing that mistakes are being made where CIL is rushed and almost dealt with as an afterthought.
Sarah-Jane is an Associate in our planning team. She advises Housing Associations and Developers on CIL and helps in obtaining reliefs and assessing sites for CIL, making sure that her clients have considered where credits or reliefs can be obtained. If you have any questions please get in touch by telephone 01872 265100 or by email email@example.com