Community Infrastructure Levy

Funding infrastructure is a continuing headache for the government. Until 2010, one of the principal means of funding infrastructure was through planning obligations under s106 Town and Country Planning Act 1990.

In 2010, the Government opted for a new approach by introducing the Community Infrastructure Levy (“CIL”).

CIL is chargeable on the development of land. It is effectively a local tax on developers requiring them to pay towards the cost of the new or improved infrastructure which will be required to support their development. Many local planning authorities have already adopted CIL and many others are at an advanced stage of the lengthy preparation process.

Liability to pay CIL arises on the first commencement of a CIL liable planning permission and anyone who has a material interest in the land at the commencement of the development may be liable to pay CIL. Whilst another party may serve an “assumption of liability notice”, if the notice is withdrawn at any point before CIL payment is due, liability will revert to current owners. So owners/occupiers need to ensure that they benefit from suitable protection within relevant contractual documentation.

There are some exemptions and reliefs from the liability to pay CIL. For example, minor developments are exempt; so are developments of residential annexes or residential extensions, provided these are to a person’s sole or main residence.

Collecting authorities have some statutory powers of enforcement in relation to outstanding CIL debts and any breaches of payment. They can impose surcharges, charge interest, issue CIL stop notices, the contravention of which is a criminal offence carrying a penalty of up to £20,000 on summary conviction or an unlimited fine on indictment. The collecting authorities can also recover CIL through asset seizure and commit a person to prison, where they have tried unsuccessfully to recover through asset seizure.

CIL is unlikely to be welcomed by the developer: it is a non-negotiable tariff tax, which is likely to represent some 5% of the total cost of the project, overall a greater burden than the traditional planning obligation regime. Furthermore, CIL bears no relation to the viability or to any adverse impact created by the development.

Eve Laws, Trainee Solicitor

For further advice please contact our Real estate team