The Community Infrastructure Levy, known as CIL, is now being established across Local Authorities in both England and Wales and has made the headlines recently as the impact of this new development levy hits home.
What is CIL?
The levy is a new charge payable on any new additional residential or commercial floor space within a Local Authority’s area.
The new levy will help pay for infrastructure required to support new developments.
The levy is based on a £ per sq m rate and the only exceptions that will not be charged CIL include a charity landowner, where the premises are used for charitable purposes, and social housing.
In addition, the levy can be waived in exceptional circumstances where a specific scheme cannot afford to pay it. However, there are strict conditions, which must be met in relation to these circumstances.
How is the rate per sq m set?
At the moment Local Authorities set their rates for each of the Use Classes (Residential, Retail, Office, Industrial and so forth) primarily with the assistance of chartered surveyors and valuers who establish land values and sales values per sq m for each of the uses identified.
Throughout this process, developers, land owners and businesses are encouraged to be involved within the rate setting process and once the draft proposals in relation to values are published, a public enquiry is held whereby representations and challenges to the values published can be made by any interested party.
Having listened to the evidence put forward by all parties, the appointed independent Planning Inspector then makes his or her final decision with regards to the level of rate per sq m to be set.
How many Local Authorities have signed up for CIL?
Out of approximately 400 Local Authorities across the UK, around 100 have either established, or are in the process of establishing, a CIL system. This includes the vast majority of London Boroughs and a large number on the South Coast of England. To date across the Midlands a number of Local Authorities are undergoing the CIL process including Newark & Sherwood, Bassettlaw, Gedling, Chesterfield, Sheffield, Rubgy, Northampton and Leicestershire. Many others are preparing briefs to consultants to tender and the number of Local Authorities who will implement CIL within the Midlands are expected to increase greatly over the next 12 months.
Is CIL retrospective?
Once a Local Authority has formally adopted CIL (after public enquiry) any new schemes that obtain planning consent after the date of adoption will be charged CIL.
Any development that obtains planning consent prior to the date of CIL adoption by a Local Authority will not be charged CIL.
Can Local Authorities manipulate the CIL rate to attract business?
This is very much a grey area, however manipulating CIL rates to attract businesses is effectively state aid, which is outlawed under European Commission laws.
Once the CIL has been established, Local Authorities cannot waive the levy to attract large employers to the area, unless it meets the strict criteria set out in relation to certain development sites, which have specific and unusual circumstances that make development unviable should the CIL be chargeable.
Will CIL stifle development?
Local Authorities are under obligation to set a CIL rate, which ensures that development is still viable in terms of making an appropriate and suitable return for the developer or occupier developing the property or land.
In all the cases that heb has been involved in, the valuation process undertaken by the Local Authorities professional advisor actually show the viable CIL rate that could be charged by Local Authorities is substantially higher than the rate actually set by Local Authorities. This breathing room is designed to ensure that development is not stifled, yet also meets the requirements of Local Authorities in providing infrastructure which ultimately developments need.
In conclusion, CIL is happening, it is here to stay and is very likely to be expanded to the vast majority of Local Authorities across England and Wales.
Local Authorities and developers, occupiers and land owners need to work together through the CIL process to ensure that the level of CIL that is set is both sustainable from the property and business sectors, but also that meets the requirement of Local Authorities as well.
About the author
Jonathan Emmerson set up HEB in 2003 after leaving LSH as head of Retail at the Nottingham office. He was previously at FHP for six years. Jon takes a keen interest in politics and may take a dive in to local elections in 2015 … He is also passionate about youth employment development and works with Bulwell academy, trying to help and encourage less affluent young adults to take up professional careers.
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