Be prepared for your Community Infrastructure Levy (C.I.L)

Mat Haynes, Commercial Property Partner at Milners, explains the impact of the CIL on your upcoming property development project.

The Leeds City Council has in the last few days approved “The Core Strategy” which is a 15 year planning framework to guide all development across the Leeds district. It provides a blueprint for sustainable economic growth through development, housing and job creation across the whole city.

The key principles of the Core Strategy provides for 70,000 new homes in the Leeds District at a rate of 3,660 a year in the initial years with a significant proportion being allocated to affordable housing.

As part of the Core Strategy the Council has voted to introduce the CIL on new developments in the city as a way of collecting contributions for infrastructure such as transport, education, flood alleviation and green space.

 

The Core Strategy and the CIL are now subject to a statutory six week period of possible legal challenge but on the assumption that they will be adopted what does it mean in reality?

Why does this affect you?

If you are a land owner who plans on carrying out some form of development then C.I.L. is likely to be of relevance to you with regard to the costs associated with and ultimately the profitability of your scheme, because it’s you who will be paying it.

If you’re an architect or a surveyor, it’s something you need to make your client aware of right at the start of a project and factor it into your planning so that there are no nasty surprises down the line when payment is due.

What is the C.I.L.?

The C.I.L. is a new planning charge introduced by the Planning Act 2008 which came into force on the 6th April 2010 through the Community Infrastructure Levy Regulations 2010.  Development may be liable for a charge under the C.I.L. and it is designed to be more transparent than the s.106 procedure.

The C.I.L. allows local authorities to set charges which developers must pay when bringing forward new development in order to contribute to new or enhanced services and infrastructure.

Adopting a C.I.L. will not prevent a s.106 agreement being completed in association with development in the future. Section 106 agreements will continue to be the primary mechanism for securing affordable housing through the planning system but its use will be restricted to the regulation of development.

C.I.L. may be charged by district and metropolitan district councils, London Borough Councils, unitary authorities, national park authorities and various other bodies.

How is the C.I.L applied?

Most buildings that people normally use will be liable to pay the levy.  Structures which are not buildings (pylons/wind turbines) will not be liable to pay the levy, also buildings into which people do not normally go ( i.e. for inspecting/maintaining fixed plant or machinery) will not be liable to pay the levy.

New buildings are only liable for the levy if they have 100 sq metres or more of gross internal floor space, or if it involves the creation of one dwelling. The 100 sq metre rule does not apply to the creation of one dwelling.

The gross floor space of any building to be demolished to make way for a new build can be deducted from the calculation of C.I.L. liability.  The gross floor space arising from development to the interior of a building may also be disregarded from the calculation for C.I.L. liability.  These deductions only apply where the existing building has been in continuous lawful use for at least 6 months in the 12 months prior to development being permitted.

The C.I.L. must be levied in £’s per square metre of floor space resulting from any chargeable development and will be applied to the gross floor space of most new buildings or extensions to existing buildings.  The C.I.L. will not normally be charged on the floor space resulting from a change of use or any floor space lost by demolition.

When does C.I.L kick in and when is it payable?

The trigger for C.I.L. is commencement of development, though payment can be made in instalments if the charging authority has an instalment policy in place.

Charging authorities will require additional information to determine whether a C.I.L. charge is due and if so how much is payable.  Once planning permission is granted the collecting authority will issue a levy liability notice.  Applicants should then assume liability to pay the levy charged prior to commencement of development.  The levy charge becomes due when development commences.  A commencement notice must be issued to the collecting authority and all owners of the relevant land notifying them of the intended commencement date of the development, a corresponding Demand Notice will then be sent to the person or persons who have assumed liability.

Development commenced under the General Permitted Development Order 1995 is liable to pay C.I.L. A notice of chargeable development must be submitted to the local authority before development commences.  The only exception to this rule is if the development is less than 100 square metres of new floor space and the development does not comprise one or more new dwellings.

What will C.I.L. be used for?

The money raised by C.I.L. can be used for the infrastructure required as a result of the development, namely transport schemes, flood defences, schools, hospitals, health and social care facilities, parks, green spaces and leisure centres.  The charging authority must provide an annual report detailing the C.I.L. receipts, total expenditure and summary of the terms of infrastructure to which the receipts apply.

Communities and the development’s neighbourhood are the main beneficiaries. The C.I.L allows local authorities to set charges which developers must pay when bringing forward new development to contribute to new or enhanced services and infrastructure and The Localism Act makes provisions for regulations which will require a meaningful proportion of these funds go to the neighbourhood where the development has taken place. As a Landowner or developer, you can be confident that your project’s neighbourhood should receive investment.

The taxpayer also benefits to an extent as The Planning Authority can no longer receive and pool contributions such as funds secured for education, public transport improvements and general public realm improvements which over the last 5 years have represented approximately 70% of the s.106 receipts. Adopting a C.I.L. charge will not prevent s.106 agreements being used in conjunction with development in the future, they will continue to be the primary mechanism for securing affordable housing through the planning system but its use will be restricted to the regulation of development.

Is there any way to avoid CIL?

Relief from the levy is available in the following three specific instances: –

1.            Firstly, a charitable landowner will benefit from relief from their liability where the chargeable development will be used wholly or mainly for charitable purposes.

2.            Secondly, there is 100% relief available for development intended to be used on social housing.

3.            Finally, exceptional circumstances relief is available only where a charging authority has made it available and each case will be considered on a case by case basis where the following three conditions are met:

a)    a s.106 Agreement must exist on the planning permission permitting to development.

b)    the cost of complying with the s.106 agreement is greater than the C.I.L. and that paying the full charge would have an unacceptable impact on the economic viability of the development.

c)    any relief the charging authority chooses to give must not constitute a notifiable state aid.

What are the commercial implications of the C.I.L?

If you’re a Landowner, you need to factor in the C.I.L at the start of your planning, asking the question “Can I still achieve what I want to achieve?”.

For more information about s.106 and C.I.L visit (http://www.pas.gov.uk/3-community-infrastructure-levy-cil/-/journal_content/56/332612/4090701/ARTICLE ) or contact Mathew Haynes on mat.haynes@milnerslaw.com

And see Mat’s interview with thebusinessdesk.com about the CIL’s implications for Leeds. http://www.thebusinessdesk.com/yorkshire/news/695040-cil.html

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