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HMRC internal manual

VAT Government and Public Bodies

Other local authority activities: miscellaneous (A to E): Community Infrastructure Levy

The Community Infrastructure Levy was introduced in 2009. Local authorities are empowered to, but not always required to, charge the levy on new developments in their area. The levy is payable by the developer and is variable being calculated on the size and range of each new development.

The levy is used by local authorities to pay for improvements to the local infrastructure to promote development of the area. As the local authority does not make any direct supply of goods or services to the developer the levy is outside the scope of VAT.

Developers can elect not to pay money to the local authority but instead transfer an asset such as land to the local authority. This is not consideration for any supplies by the local authority to the developer. However the transfer of the asset can result in a supply of it by the developer to the local authority.

Where a supply of an asset takes place and VAT is charged by the developer to the local authority the VAT must be attributed according to the intended use of the asset. If the local authority does not know the nature of the intended use the VAT incurred is at that stage residual in the same way that VAT incurred on general overheads would be.