Community Infrastructure Levy - Planning Update

The Planning Act 2008 provides the legislative framework for the Community Infrastructure Levy ("CIL"). The Government began the consultation on its detailed proposals for the introduction of CIL on the 30th of July 2009. This consultation ended on 23 October 2009. The revised regulations, incorporating the response from the consultation, will be laid before the Parliament for its approval, before coming into force on 06 April 2010.

The CIL will be a new charge which local authorities in England and Wales will be entitled, but not required, to levy on most types of new development in their areas.  The proceeds of the levy will be spent on local and sub-regional infrastructure to support the development of the local area. There is a statutory requirement for CIL to be spent on infrastructure and the Government makes a commitment that funds levied in this way will be additional to existing spending.

The Government makes the case that since almost all development has some impact on the need for the provision of infrastructure, services and amenities, it should contribute to their provision.  It also argues that it is right that those who benefit financially from the granting of planning permission should share some of that gain with the community, to help fund the infrastructure needed in order to achieve acceptable and sustainable development.

In the draft consultation the Government is mindful of the difficult economic situation and how it affects developers. Four particular features of CIL will help ensure it is fit for a wide range of economic conditions. These are:

1. Local authorities decide whether the conditions in their area make it appropriate to introduce CIL and if so at what level;
2. where CIL is introduced, the authority will need to set charges which reflect the economic circumstances of its area; 
3. the charges will be kept under review to reflect the situation of the identified needs on which they are based and remain responsive to market changes such as land values and development priorities; and 
4. the charges will be indexed against a measure of construction cost to enable wider changes in cost prices to be reflected in the charges.
   

The proposals

• The Government believes that CIL should not be used for general local authority expenditure, nor to remedy pre-existing deficiencies in infrastructure provision except to the extent that those deficiencies will be aggravated by new development. It can however be used to facilitate better use of existing infrastructure to increase capacity. The example of additional sports facilities is used as illustration. Infrastructure has been defined to include roads, flood defences, schools, medical facilities, sporting, recreational facilities etc. CIL will be taken into account alongside other revenue streams for the supply of infrastructure.
  
  
• CIL receipts can be used only to fund infrastructure.  The Planning Act 2008 provides a definition of what is infrastructure to which CIL can be applied. Transport and flood defences as well as schools, recreational facilities and open spaces are specifically covered in the Act. A wide definition of infrastructure is favoured to give local communities flexibility to chose what infrastructure they need to deliver their development plan.
  
  
• CIL can contribute to sub-regional infrastructure as it can often be the most critical type of infrastructure in terms of unlocking significant housing or economic development. This will enable local planning authorities to agree voluntarily to fund sub-regional infrastructure through CIL.
  
  
• The draft regulations indicate that charging authorities can spend money outside their area to provide infrastructure where that infrastructure benefits the development of their area. National bodies will be able to receive CIL funding to deliver development that will benefit local or sub-regional area.
  
  
• The Government proposes that the collection of CIL and the infrastructure delivered through CIL should be transparently reported in order to ensure accountability and transparency.
  

2.    Setting and Payment of the CIL Charge

• It is proposed that those authorities who prepare development plans should be charging authorities. An up to date development plan should be in place before the authorities can start charging CIL. The development plan should be supported by an infrastructure planning process which will identify what infrastructure will be needed and its likely cost. Taking other funding into account the authority will then be able to identify gaps in funding and arrive at a proposed amount to be raised from CIL.
  
  
• It is proposed that CIL will be levied on new buildings. For non-residential developments a threshold of 100 square metres  will be the cut off point below which CIL will not be chargeable. The Government proposes to exclude all householder development by resident home owners from payment of CIL. The charging authority should prepare a draft charging schedule which will be a new type of document within the Local Development Framework. The charging schedule should allocate the proposed amount raised from CIL to each main class of development envisaged by the development plan.
  
  
• CIL will not be due until commencement of development with a 28 day 'payment window'. Where development is phased, so will be CIL payment. The charging authority will also be the collecting authority.
  
  
• The party liable to pay CIL will be the party who assumes liability prior to the day before the commencement of development through a liability notice. Where no one comes forward the liability will default to the owners of the land and will pass with the ownership of it. Development by charities for charitable purposes will be exempt from CIL.
  

3.    Powers of the charging authorities and Planning   Obligations

• Enforcement measures are proposed to ensure that CIL is paid as required. A key tool will be the potential to register CIL liability as a Local Land Charge. This will ensure that potential purchasers of the developed land and property are aware of the existence of the outstanding liability. Late payments of CIL will accumulate both interest and surcharge. which will be specified nationally.
  
  
• Planning obligations will remain available to local planning authorities after the CIL comes into force as planning obligations can be a useful tool to ensure that the specific impact of a development can be mitigated.  Planning obligations will also continue to be used to secure affordable housing.
  
  
• It is proposed that the existing policy tests governing planning obligations will be made statutory in order to provide more clarity about the respective purposes of CIL and planning obligations.
  
  
• It is reiterated that planning conditions are preferred to planning obligations wherever possible.
  

How has CIL been received

The draft proposals have been debated widely and concerns have been raised in relation to the levy. Some of the areas causing concern are:

• It has been argued that the levy is not workable as few eligible councils have up to date development plans which are a prerequisite for charging the levy; 
• it is unclear how the levy will work alongside section 106 planning obligations and that the extra burden on the developers may reduce the number of affordable homes built;
• it is unclear how sub-regional infrastructure projects would be funded. There is no guarantee as such that the levy funds will be spent on infrastructure; and
  
• in the beginning when the CIL idea was being refined, there was a general understanding that it would be optional; however the local authorities are beginning to realise that they will not be able to get funding anywhere else so they will have to start charging CIL, although in some instances without proper structure in place for doing this.
  

Ashfords LLP is regulated by the Solicitors Regulation Authority. The information in this note is intended to be general information about English law only and not comprehensive. It is not to be relied on as legal advice nor as an alternative to taking professional advice relating to specific circumstances.