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Community infrastructure levy (CIL)

Community infrastructure levy (CIL) is a recent statutory creation, having been established by the Planning Act 2008 in place of the Planning-gain Supplement (for which statutory preparations had been made but which was never implemented). CIL is effectively a local tax, and is entirely domestic law without (yet) significant EU implications or particular human rights issues. There are difficult issues about the interaction between CIL and other provisions of planning law, in particular s.106 agreements under the Town and Country Planning Act 1990. CIL was introduced by Pt 11 of the Planning Act 2008, but that Part is merely skeleton legislation and the entire structure is left to be determined by secondary legislation, which has now been done. CIL was commenced generally in 2010, but local commencement depends on implementation by each local planning authority. CIL applies only in England and Wales.

The law as stated in this article is accurate for England and for Wales (with specified modifications).

Overview of Topic

1. The fundamental policy of CIL is that when large developments of new residential or commercial buildings are made in an area, they require to be matched by new or improved infrastructure of various kinds, mostly falling to be funded by local authorities or other sources of public money.

2. To reflect that, CIL is effectively a tax on developers requiring them to pay towards the cost of the new or improved infrastructure that will be required to support their development.

3. Although the framework for CIL is set at central-government level, this is a local tax to be implemented and controlled by local planning authorities.

4. The regime has now been commenced nationally in the sense that the necessary legislation is in place to enable local authorities to prepare to charge CIL.

5. A number of authorities are at an advanced stage of the lengthy preparation process.

6. CIL is charged on development (see: Development (planning)) and is payable by developer, by reference to published charging schedules. The calculations of the amounts payable can be complicated and can include a combination of factors, including but not limited to size of development. There is provision for exemption from CIL for charitable and similar developments.

Statutory purpose

7. At the beginning of the CIL provisions of the Planning Act 2008 there is a purpose clause that could have a profound effect on how CIL is imposed, managed, challenged and construed.

8. Section 205(2) requires the Secretary of State to aim to ensure 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.

9. Although this duty is attached to the making of CIL regulations, the ability to revise the CIL regulations makes this, in effect, a continuing statutory purpose against which the lawfulness of the CIL regulations and things done under them can be judged.

10. In introducing the Second Reading in the House of Commons of the Bill for the 2008 Act on 10 December 2007 the Secretary of State for Communities and Local Government (Hazel Blears) said as follows: 

"The changes to town and country planning seek to make it fairer, more proportionate and greener. They will also devolve more power to the local level, which is something close to my heart. The changes are part of the widespread continuing improvement to the planning system. First, we propose the community infrastructure levy in part 10, which will increase investment in the vital infrastructure that is needed for many new communities, which hon. Members have already mentioned. The levy has the potential to raise hundreds of millions of pounds of additional investment, on top of current Government funding and the section 106 negotiated agreements. It is for local authorities to decide what community infrastructure is needed, which could relate to transport, new schools, parks or health centres. It is absolutely right that local developers contribute to the cost of that infrastructure and that local communities benefit from the increase in land value when permission is granted."

(Hansard, HC Vol.469, col.32 (December 10, 2007)).

11. The statutory purpose carries through to the detailed regulations: so, for example, 

"In setting rates (including differential rates) in a charging schedule, a charging authority must aim to strike what appears to the charging authority to be an appropriate balance between- (a) the desirability of funding from CIL (in whole or in part) the actual and expected estimated total cost of infrastructure required to support the development of its area, taking into account other actual and expected sources of funding; and (b) the potential effects (taken as a whole) of the imposition of CIL on the economic viability of development across its area."

reg.14(1).

Key concepts

12. The CIL Regulations operate by reference to a number of key concepts defined in the 2008 Act and in the Regulations themselves.

13. The most important are:

a. "planning permission" - see s.208 and reg.5;
b. "development" - reg.6;
c. "commencement" of development - reg.7;
d. "chargeable development" - reg.9.;
e. "collecting authority" - reg.10.

Charging authorities

14. CIL is imposed and administered by the local charging authority - s.206(1).

15. The general rule is that a local planning authority for an area is also the local charging authority - s.206(2).

16. In England a county council for an area for which there is more than one district council is the collecting authority for CIL charged in its area in respect of development for which it grants planning permission - reg.10(4).

17. There are other exceptions to the general rule; in particular, in London the Mayor is a charging authority (see: Greater London Authority: London Mayor and Assembly), for which purpose a Mayoral development corporation is the collecting authority - reg.10(3).

18. Additional modifications to the concept of charging authorities can be made by CIL regulations s.206(3)-(4); reg.10.

19. Where planning functions are exercised by a joint committee (see: Joint planning committees) it may exercise functions in relation to CIL - s.207.

Liability

20. CIL is chargeable on development of land (see: Development (planning)) - s.206(1).

21. In this context "development" is to mean erection or adaptation of buildings - s.209(1).

22. Liability arises when development is commenced in reliance on planning permission - s.208; regs 7 and 8.

23. Although in practice it will generally be clear what is and is not development for the purposes of attracting liability to CIL, the CIL regulations are able to make clarificatory provision - s.209(4).

24. So far this power has been used to exempt buildings which people do not generally enter or which they enter only to inspect machinery - reg.6.

25. The Act and the regulations focus on the concept of assumption of liability, whereby before development someone simply admits that they are the liable person: 

"A person who wishes to assume liability to pay CIL in respect of a chargeable development must submit an assumption of liability notice to the collecting authority."

reg.31.

26. Assumed liability can be transferred later - reg.32.

27. Who has to pay? The scheme of the 2008 Act assumes that liability for CIL will generally be agreed by one person identifying itself as the liable developer - s.208(1). Assumptions of liability are provided for by regs 31-33.

28. Provision is made for imposing liability where nobody assumes it under s.208(1)reg.33. If nobody assumes liability before the chargeable development commences, the main rule is that "Liability to pay CIL must be apportioned between each material interest in the relevant land" - reg.33(2).

29. Apportionment follows a formula set out in reg.34.

30. Provision is made for liability to be shared or apportioned in some circumstances - reg.34. Liability of joint owners is joint and several - reg.37.

Exemptions and reliefs

31. Detailed provision for exemption and relief is found in Pt 6 of the CIL Regulations.

32. Charitable activities are exempt from CIL, or subject to discretionary relief - s.210, and regs 43-48.

33. Regulation 42 exempts minor development, the key being a single non-residential building of less than 100 square metres.

34. Social housing is eligible for relief in certain circumstances - regs 49-54.

35. Charging authorities have a discretionary power to grant relief in exceptional circumstances - regs 55-58.

Charging schedules

36. The amount of CIL payable is determined by reference to each charging authority's charging schedule - s.211.

37. Charging authorities are required to set amounts by reference to a combination of overall infrastructure costs and the viability of development - s.211.

38. So a balance is to be struck: CIL is designed to meet the costs of development, but not at such a level as would seriously deter development by making it uneconomic - reg.14.

39. Charging schedules have to be developed in consultation, and may be varied from time to time - s.211. There is an elaborate procedure for the preparation of a draft charging schedules, including public consultation - reg.15.

40. An independent examiner has to be involved in the preparation of a schedule - s.212. The examiner has to take into account representations made on the draft charging schedule - reg.20.

41. Detailed requirements for charging schedules are set out in Pt 3 of the CIL Regulations. Provision includes: rules for form and content; permission to charge differential rates; consultation and examination of drafts.

42. An oral hearing may be required by people who make representations on a draft charging schedule - reg.21.

43. Charging authorities have some autonomy in setting format and content of their charging schedules - reg.12(1).

Amounts

44. The key regulation for the calculation of the chargeable amount in respect of a development is reg.40, which contains a formula by reference to the net area of the chargeable development.

45. In calculating the net area one ignores, in particular, buildings scheduled for demolition.

46. The fundamental idea is that developers are to be charged only for new development, not merely replacing existing buildings in a way that does not give rise to a need for additional infrastructure.

47. Arrangements for payment are expected to include provision for payment by instalments and on account - s.217; regs 69B, 70.

48. There is also provision for payment in kind, including transfers of land - reg.73. Part 7 of the Regulations includes special rules about the application of land that is acquired by way of payment in kind - see reg.58A.

49. There is provision for enforcement, including interest and penalties - s.218.

50. Part 9 of the CIL Regulations provides further detail, including: fixed surcharges for failure to assume liability; surcharges where liability is required to be apportioned; surcharges for failure to submit or comply with notices; surcharges for late payments; interest on late payments.

51. The enforcement provisions include a stop notice procedure allowing chargeable authorities to prevent development pending payment of CIL.

52. The CIL regulations also provide for distress and sale of goods in respect of unpaid liability, with potential criminal liability; charging orders can also be made, and local land charges can be enforced, where specified conditions are satisfied.

53. A charging authority may set different rates for different purposes: in particular: 

"A charging authority may set differential rates- (a) for different zones in which development would be situated; (b) by reference to different intended uses of development"

reg.13.

Appeals

54. There is no appeal against liability to pay CIL in itself; but there is a right of appeal on questions of fact in relation to the application of methods for calculating CIL - s.215.

55. There are also rights of appeal in relation to reliefs and enforcement procedures.

56. The appeal is to a valuer.

57. Part 10 of the CIL Regulations contains detailed provision about appeals.

Use of CIL

58. CIL is effectively a hypothecated tax, required to be spent on the purposes for which it was collected. Section 216 requires CIL to be spent on infrastructure, although the list of what is included as infrastructure is already very broad and can be expanded by secondary legislation.

59. Part 7 of CIL regulations makes detailed provision about how CIL is to be applied, the fundamental obligation being to support the development of the charging authority's area - reg.59.

60. The fundamental proposition is that: 

"A charging authority must apply CIL to funding the provision, improvement, replacement, operation or maintenance of infrastructure to support the development of its area."

reg.59(1).

61. There are also detailed rules allowing charging authorities to reimburse themselves for expenditure already incurred, to repay loans and to cover administrative expenses - regs.60-61.

62. Charging authorities have to prepare annual reports on the use of CIL - reg.62.

63. Since the passage of the Localism Act 2011 charging authorities in some circumstances have duties to share CIL collected with other local authorities. So, for example, "a charging authority , other than the Mayor , must pass to every local council within its area a proportion of CIL receipts" - s.59A(2). "A local council must use CIL receipts passed to it in accordance with regs 59A or 59B to support the development of the local council's area, or any part of that area, by funding- (a) the provision, improvement, replacement, operation or maintenance of infrastructure; or (b) anything else that is concerned with addressing the demands that development places on an area." - reg.59C.

Information

64. The CIL regulations oblige developers to provide information that might be relevant to the obligation to pay CIL - reg.77.

65. Charging authorities can also use information acquired by them in other circumstances - reg.79.

Administration - Outsourcing

66. Local Authorities (Contracting Out of Community Infrastructure Levy Functions) Order 2011/2918 came into force on 7 December 2011.

67. It allows local authorities and other CIL charging bodies to contract out their levy functions (see: Local government: contracting out).

68. The order is made under the Deregulation and Contracting Out Act 1994 s.70. The order allows the contracting out of functions relating to the setting, charging, collection, enforcement and spending of CIL. It does not allow the outsourcing of functions of proposing, implementing or withdrawing the charge to CIL.

69. The Government's Explanatory Memorandum to the Order gives the following account of its policy background: Allowing levy authorities to contract out functions will enable a competitive bidding process between suppliers; with the attendant potential to drive costs of services down and standards up. The objective is to support authorities and the Mayor to meet their duty to provide best value to the public. Levy authorities will be able to choose which, if any, of these functions they deem it appropriate to contract out.

Statutory guidance

70. Under the 2008 Act s.221

"The Secretary of State may give guidance to a charging authority or other public authority (including an examiner appointed under s.212) about any matter connected with CIL; and the authority must have regard to the guidance."

71. The latest guidance is found at www.gov.uk.

72. The following are some key issues addressed by the guidance which significantly supplement the statutory material.

73. Paragraph 8:

"By providing additional infrastructure to support development of an area, the levy is expected to have a positive economic effect on development across an area. In deciding the rate(s) of the levy for inclusion in its draft charging schedule, a key consideration is the balance between securing additional investment for infrastructure to support development and the potential economic effect of imposing the levy upon development across their area. The Community Infrastructure Levy regulations place this balance of considerations at the centre of the charge-setting process. In meeting the requirements of reg.14(1), charging authorities should show and explain how their proposed levy rate (or rates) will contribute towards the implementation of their relevant Plan and support the development of their area. As set out in the National Planning Policy Framework in England, the ability to develop viably the sites and the scale of development identified in the Local Plan should not be threatened."

74. Paragraph 10:

"The examiner should be ready to recommend modification or rejection of the draft charging schedule if it threatens delivery of the relevant Plan as a whole."

75. Paragraph 16:

"If an authority considers that the infrastructure planning underpinning its relevant Plan is weak or does not reflect its latest priorities, it may undertake additional bespoke infrastructure planning to identify its infrastructure funding gap. This work may be limited to those projects requiring funding from the levy, rather than covering all the potential infrastructure projects for the area."

76. Paragraph 24:

"There are a number of valuation models and methodologies available to charging authorities to help them in preparing evidence on the potential effects of the levy on the economic viability of development across their area. There is no requirement to use one of these models, but charging authorities may find it helpful in defending their levy rates to use one of them."

77. Paragraph 30:

"Charging authorities should avoid setting a charge right up to the margin of economic viability across the vast majority of sites in their area. Charging authorities should show, using appropriate available evidence, including existing published data, that their proposed charging rates will contribute positively towards and not threaten delivery of the relevant Plan as a whole at the time of charge setting and throughout the economic cycle."

78. Paragraph 40:

"In all cases, differential rates must be set in such a way so as not to give rise to notifiable State aid - one element of which is selective advantage. Authorities who choose to differentiate rates by class of development or by reference to different areas, should do so only where there is consistent evidence relating to economic viability that constitutes the basis for any such differences in treatment. It is the responsibility of charging authorities to ensure that their charging schedules are State aids compliant."

79. Paragraph 115:

"We expect Parish and Community Councils to work closely with charging authorities and neighbouring Parish and Community Councils to agree infrastructure priorities. If the Parish or Community Council agrees with the charging authority's infrastructure priorities, they can agree that the charging authority should retain the neighbourhood funding to spend on that infrastructure. This prevents money passing between bodies when it is not necessary because priorities are aligned and helps to ensure that all available funding for infrastructure can be used to the greatest effect and to deliver sustainable development. It may be that this infrastructure is not in the Parish or Community Council's area, but will support the development of their area, such as a bypass or school somewhere else in the local area. Parish and Community Councils, and charging authorities, will want to work together to discuss priorities during the process of setting the Levy rate(s), which is covered in earlier sections of the guidance."

Welsh Government Guidance

80. Welsh Ministers have produced Guidance for the application of CIL in Wales and the preparation of charging schedules. The introduction says: "We consider it important to assist Welsh local authorities deliver infrastructure from planning to support future development. To do this, we have produced this specific guidance for Wales. This guidance sits alongside the Secretary of State for Communities and Local Government (CLG) guidance. It covers the devolved development plan system in Wales." Community Infrastructure Levy - A Guide to the Production of a Charging Schedule.

 

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