True cost of community infrastructure levy

One important aspect of the new Planning Act 2008, the community infrastructure levy, has the potential to hit developers in the pocket. Nick McDonald reports

The Planning Bill always looked destined for a rocky road and, although the Government made some tweaks to it, it has now become the Planning Act 2008 in a surprisingly similar form to the original bill. One important part of the act which has the potential to hit developers and others in the pocket is the community infrastructure levy (CIL).

While much of the detail on CIL will be covered in regulations, the act and current guidance do offer information on CIL’s likely final form. The act states that the overall purpose of CIL is to ensure that “costs incurred in providing infrastructure to support the development of an area can be funded (wholly or partly) by owners or developers of land”.

CIL can be charged by local planning authorities on development in their administrative area and will be determined by the authority’s charging schedule, which will set out the rates of CIL.

Setting rates
Rates are likely to be set by reference to the type and size of a development. The authority must carry out consultation on their charging schedule and must have it independently examined. The guidance envisages CIL rates varying depending on the type of development, taking in to account viability and its impacts. Therefore a higher CIL rate per development area or unit will be set for a more profitable development type that has a high impact on infrastructure.

CIL may be used by local authorities to build infrastructure including road and other transport facilities, open space, schools, flood defences, affordable housing, medical facilities and sports facilities. Waste facilities are not mentioned, at least for now – regulations may make further provision for what can or cannot be funded through CIL.

CIL liability bites at the point that development is carried out pursuant to a planning permission, and is likely to be payable within a set period from that date – 28 days has been mooted. Who will have to pay CIL is not yet known, but the act makes provision for owners, developers and third parties to be potentially liable. Both owner and developer are widely defined and therefore CIL could bite on parties who may not be expecting it.

The only exemption from CIL provided for in the act is development for charities. Guidance has stated that householder development will not incur CIL liability, but otherwise has indicated that exemptions will be few and far between. In addition, although there will be de minimis thresholds, these are likely to be set low.

How soon?
So, how quickly will CIL get off the ground? It is likely to be a considerable time before CIL first becomes payable anywhere. Firstly, the Government needs to consult on and finalise detailed regulations. Then, in order to charge CIL, the indications are that a local authority will have to have an up-to-date adopted development plan – many authorities are currently struggling to get their new local development framework documents in place.

If there is an up-to-date development plan, the authority will then have to follow the consultation and examination requirements for their charging schedule – debates at the public inquiries into charging schedules are likely to be vigorous, with the possibility of legal challenges from affected owners or developers. Only once the schedule is adopted can the authority start charging CIL.

The Government is considering whether differential charging rates within an authority’s area are appropriate, to take in to account differing conditions such as land values, brownfield land in need of regeneration, or the lack of infrastructure. Anyone with an interest in an area which could benefit from reduced CIL charges should ensure that they are geared up to make representations to the local planning authority on the charging schedule.

The Government considers that once CIL is up and running, section 106 agreements will only be required for affordable housing. However, there will certainly be a transitional period during which both CIL and section 106 agreements are relevant and even after that, agreements will still be needed to regulate the development itself.

Looking ahead, much needs to happen before CIL is actually chargeable and there is the possibility that it simply remains unused on the statute books. However, everyone needs to be prepared in case CIL does kick in and to be ready to make representations to the local planning authority to protect their positions.

Nick McDonald is a solicitor in the planning & environmental team at Pinsent Masons

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