Section 2: The Community Infrastructure Levy

The Valuation Office for Agency's (VOA) technical manual for Community Infrastructure Levy (CIL).

2.1 Introduction

This section contains a brief overview of the CIL provisions to provide background information relevant to the VOA’s role in determining CIL appeals. Full guidance on the application of CIL can be found at www.gov.uk - MHCLG CIL Guidance.

2.2 Legislation

The legislation providing for the introduction of the Community Infrastructure Levy (CIL) is contained in S.205-225 of the Planning Act 2008. The provisions enabling local authorities to charge CIL came into force in England and Wales on 6 April 2010 through the Community Infrastructure Levy Regulations 2010 (SI No. 948). CIL does not apply in Scotland.

Some amendments to the 2010 Regulations have been made by the Community Infrastructure Levy (Amendment) Regulations in 2011, 2012, 2013 and 2014, 2015, 2018, 2019 and 2020.

2.3 Planning Permission for Chargeable Development

The CIL Regulations 2010 allow charging authorities to levy CIL on most types of new development in their areas, permitted through some form of planning permission (as defined in regulation 5 of the CIL Regulations (2010) (as amended)). These permissions will include those granted by the local planning authority; permitted development rights under the General Permitted Development Order; those granted under local planning orders such as Simplified Planning Zones and those granted under Acts of Parliament, for example, the Crossrail Act 2008.

The planning permission identifies the buildings that will be liable for CIL; this is known as the ‘chargeable development’. CIL becomes due on the date that a development is commenced in accordance with the terms of the relevant planning permission. Development is normally to be treated as having commenced when a material operation is first carried out on the land; material operation having its normal meaning in planning terms.

CIL does not apply to structures that are not buildings or buildings into which people do not normally go or that they only access intermittently for maintaining or inspecting machinery; or where planning permission was granted for a limited period.

2.4 Charging Schedules

The ‘charging authorities’ include local planning authorities and national park authorities in both England and Wales and the Mayor of London. These authorities are responsible for preparing a charging schedule for their area setting out details of the infrastructure intended to be funded by CIL and the rates of the levy. The charging schedules are subject to public consultation and public examination by an independent person before they can be formally approved.

CIL is to be used to fund local and sub regional infrastructure that benefits the area where it was raised and will operate alongside contributions made under s.106 of the Town and Country Planning Act 1990.

2.5 The Rate of CIL

CIL is levied in pounds per square metre on the net increase in floor space arising from development. The net increase in floor area is arrived at by deducting the gross internal area (GIA) of certain existing buildings on the site from the GIA of the chargeable development, as long as the existing buildings are to be demolished or will form part of the chargeable development when completed.

In order to deduct the GIA of existing buildings to be lost through change of use or demolition, these buildings must be in lawful use for a continuous period of at least six months within a period of three years, ending on the day planning permission first permits the chargeable development. Buildings which do not meet this requirement may still qualify if they are to be retained and the intended use following completion of the chargeable development is a use that is able to be carried on lawfully and permanently without further planning permission on the day before planning permission first permits the chargeable development. No deduction is appropriate if the existing building is one into which people do not go; such that it is only accessed intermittently for maintaining or inspecting machinery; or where planning permission was granted for a limited period.

The levy may vary between different locations within the same charging authority’s area and between different types of development within that area, as long as these differential rates are set out in the charging schedule.

The amount of CIL payable is increased each year by reference to the RICS CIL Index, but the amount is calculated at the rate that applies at the point planning permission is granted.

2.6 Development Liable for CIL

The majority of buildings that people normally use may be liable for CIL. However, those buildings into which people do not normally go, and buildings into which people only go intermittently for the purpose of inspecting or maintaining fixed plant and machinery, are not treated as chargeable development for CIL purposes.

Those structures that are not buildings, for example, pylons and wind turbines, are not be liable to pay CIL.

By virtue of regulation 6 (as amended) some works are not treated as development for the purposes of CIL liability (for example, the change of use of any building previously used as a single dwellinghouse to use as two or more separate dwellinghouses).

2.7 Minor Development Exemption

Any new build (i.e. a new building or an extension) is only liable for CIL if it has a GIA of 100 square metres or more unless the chargeable development comprises one or more additional dwellings (for example, a new dwelling with a GIA of 80m2 would be liable to a CIL charge). In addition, if the chargeable amount comes to less than £50 it is deemed to be zero.

Internal alterations that do not require planning permission are not liable for CIL. A change of use that requires planning permission is development for the purposes of CIL, but if there is no ‘new build’ or no net increase in the GIA of the existing building (see paragraph 2.5 above) then the charge would be zero. Regulation 42(3) defines ‘new build’ as that part of the development which will comprise new buildings and enlargements to existing buildings.

2.8 Charitable Relief

Charitable institutions are exempt from paying CIL if they own a material interest in the land and the chargeable development will be used wholly or mainly for charitable purposes.

Where there is more than one material interest in the land the CIL charge has to be apportioned between the qualifying interest and other non-qualifying interests by reference to a formula based on the market values of those different interests.

A charging authority can also offer discretionary relief to charities in certain circumstances.

There are claw back provisions if the development no longer qualifies for relief within seven years of the commencement of development.

2.9 Exemption for Residential Annexes or Extensions

The CIL (Amendment) Regulations 2014 introduced an exemption for ‘residential annexes’ and ‘residential extensions’ where a person owns a material interest in a dwelling (“main dwelling”) and occupies the main dwelling as their sole or main residence.

Development is a ‘residential annex’ if it is wholly within the curtilage of the main dwelling and comprises one new dwelling. Development is a ‘residential extension’ if it is an enlargement to the main dwelling and does not comprise a new dwelling.

The exemption for residential annexes may be withdrawn if a ‘disqualifying event’ occurs during a clawback period of three years. Disqualifying events are:-

(a) the use of the main dwelling for any purpose other than as a single dwelling

(b) the letting of the residential annex

(c) the sale of the main dwelling or the residential annex unless they are sold at the same time to the same person

Where the exemption is withdrawn the relevant person is liable to pay an amount of CIL equal to the amount of CIL that would have been payable on commencement of the development if the exemption had not been granted (or the amount of relief granted, if less).

2.10 Exemption for Self-Build Housing

The CIL (Amendment) Regulations 2014 introduced an exemption for self-build housing and self-build communal development that is built by a person (including a dwelling built following a commission by the person) and is occupied as their sole or main residence.

Development is self-build communal development if it is for the benefit of the occupants of more than one dwelling that is self-build housing, whether or not it is also for the benefit of the occupants of relevant development. Development is not self-build communal development if it is:-

(a) wholly or partly made up of one or more dwellings

(b) wholly or mainly for use by the general public

(c) wholly or mainly for the benefit of occupants of development which is not relevant development

(d) to be used wholly or mainly for commercial purposes

The amount of any self-build communal development that a person can claim the exemption in relation to must be calculated by applying the following formula:-

XxA

_

B

Where:-

X = the gross internal area of the self-build communal development.

A = the gross internal area of the dwelling in relation to which the person is claiming the exemption for self-build housing.

B = the gross internal area of the self-build housing and relevant development, provided that the self-build communal development is for the benefit of that housing and that relevant development.

The exemption may be withdrawn if a ‘disqualifying event’ occurs during a clawback period of three years. Disqualifying events are set out in regulation 54D and include the sale or letting out of the whole dwelling. Where the exemption is withdrawn the relevant person is liable to pay an amount of CIL equal to the amount of CIL that would have been payable on commencement of the development if the exemption had not been granted (or the amount of relief granted, if less).

2.11 Social Housing Relief

A chargeable development which comprises social housing will receive full relief from CIL for the ‘qualifying dwellings’ within the development.

If only part of the chargeable development comprises qualifying dwellings the CIL charge is essentially based on the GIA of the non-qualifying development. Details of how the amount qualifying for social housing relief is calculated is set out in regulation 50 of the CIL Regulations 2010 (see Appendix 7).

There are also claw back provisions if the development no longer qualifies for relief within seven years of the commencement of development.

2.12 Relief for Exceptional Circumstances

The regulations give charging authorities discretion to grant relief where it considers the CIL charge would have an unacceptable impact on the economic viability of a particular development. If the charging authority wishes to grant relief in their area they must first publicise their intention to do so. Relief can only be granted if a set of tightly drawn conditions are met. One of which is the need for a s.106 agreement to be in existence and the cost of complying with that agreement must exceed the CIL charge.

2.13 Liability and Payment of CIL

Responsibility for levying and collecting the CIL charge rests with the ‘collecting authority’. The collecting authority is normally the same as the ‘charging authority’ but with some exceptions (e.g. in London the boroughs are responsible for collecting CIL on behalf of the Mayor).

Liability to pay the CIL charge arises on the commencement of development. Anyone can come forward and assume liability for payment of the CIL charge prior to the commencement of development. By coming forward a person benefits from a 60 day payment window (or such time set out in the collecting authority’s instalment policy) from the commencement of development and any instalments policy in place, as set out by the collecting authority. If no one assumes liability before the commencement of development then liability falls on the landowner(s) (i.e. anyone with an interest greater than a lease with more than 7 years to run at the date on which planning permission first permits the chargeable development) and payment becomes due in full on commencement of development.

Payment can also default to the landowners where the collecting authority has been unsuccessful in recovering payment from the person who came forward and assumed liability to pay the CIL.

If there is more than one landowner the collecting authority must apportion the CIL charge between the landowners in accordance with the apportionment formula contained in regulation 34. This formula involves valuing all the material interests in the land, based on an open market value calculated as though the development had been completed.

2.14 Enforcement of CIL Liability

To ensure payment the regulations provide for a range of proportionate enforcement measures including surcharges on late payments.

In the case of persistent noncompliance the charging authority can take more direct action and this includes issuing a CIL stop notice to prohibit further development until payment is made. A person can be convicted for the contravention of a stop notice and the courts can impose significant fines.

2.15 Determining Liability

The collecting authority must serve a ‘liability notice’ (regulation 65) on the relevant person, any person who has notified the authority that they wish to assume the liability and the land owners. The liability notice must be issued as soon as practicable after the day on which a planning permission first permits development. The notice must specify the CIL chargeable amount and any relief granted. The relevant person is in most cases the person who applied for planning permission or in the case of planning permission granted subject to a condition requiring that further approval is obtained before commencing development, the person who has applied for that approval. In the case of a general consent, the relevant person is the person who submitted a notice of chargeable development.

In the majority of cases planning permission first permits development on the day permission is granted, although if there is a condition requiring further approval before development can commence it is the date of the final approval. In the case of outline permissions, it is the date of final approval of the last reserved matters. Where planning permission permits development in phases, it is the date of the final approved matter associated with that phase.

A person who wishes to assume liability to pay CIL can submit an ‘assumption of liability notice’ to the collecting authority (regulation 31). In most cases this can only be done before the chargeable development has commenced. The exception is where the person who has assumed liability has transferred that liability to another person in accordance with the regulations.

Where planning permission is granted for a chargeable development, a ‘commencement notice’ (regulation 67) must be submitted to the collecting authority no later than the day before the chargeable development is to take place. The collecting authority will determine the commencement date if it has not received a commencement notice, or has reason to believe that commencement took place at an earlier date.

When a commencement notice is received (or, in the absence of such a notice, a commencement date is determined by a collecting authority) the collecting authority must serve a ‘demand notice’ on the person(s) liable to pay CIL (regulation 69).

Where planning permission is granted for development by way of a general consent a ‘notice of chargeable development’ must be submitted to the collecting authority in accordance with regulation 64. Where a person fails to submit such a notice and the collecting authority are satisfied that one should have been submitted, the collecting authority must serve a notice of chargeable development and a demand notice on the owner(s) of the land.

2.16 Review of Chargeable Amount by the Collecting Authority

An interested person (regulation 112(2)) may request a review of the calculation of a chargeable amount in writing to the collecting authority within 28 days of the issue of the liability notice (regulation 113) and this request may include representations. The collecting authority has 14 calendar days from the date it receives a request for a review within which to issue a decision.

A person cannot request a review once the relevant development has commenced and a review will lapse if development commences before the collecting authority has issued a decision.

2.17 Appeals

Appeals can be made to an ‘appointed person’ (regulation 112) against:-

• the collecting authority’s calculation of the CIL chargeable amount (regulation 114)
• the collecting authority’s apportionment of a CIL charge between different landowners in ‘default’ cases (regulation 115)
• the collecting authority’s determination of the value of the interest in land in respect of which charitable relief was claimed (regulation 116)
• the collecting authority’s decision not to grant exemption for a residential annex because the annex is not wholly within the curtilage of the main dwelling (regulation 116A)
• the collecting authority’s calculation of the amount of the exemption for self-build housing (regulation 116B)
• the collecting authority’s decision to impose a surcharge (regulation 117)
• the collecting authority’s decision on the deemed commencement date for the chargeable development (regulation 118)
• the collecting authority’s decision to serve a stop notice (regulation 119)
• the collecting authority’s calculation of the amount of ‘notional relief’ when calculating the chargeable amount when a pre-CIL planning permission is amended (Schedule 1, paragraph 9)

In the case of appeals under regulations 114, 115,116, 116A, 116B and Schedule 1 (paragraph 9) the appointed person is either a ‘valuation officer’ (appointed under s.61 of the Local Government Finance Act 1988) or a ‘District Valuer’ (within the meaning of s.622 of the Housing Act 1985). These appeals are therefore dealt with by the VOA and full details of the regulations relating to these appeals are set out in the following sections of this Manual.

In the case of appeals under regulations 117, 118 and 119 the appointed person is the Secretary of State or a person appointed by the Secretary of State. These appeals are dealt with by the Planning Inspectorate.

2.18 Examples

Examples to illustrate the basic method of calculating a CIL liability are included in Appendix 1.