CIL – Should I be worried?

Introduced in April 2010, CIL will operate as a tax on development subject to certain exceptions. Chamber Planning & Development Group member Paul Clarke Bidwells updates you

What is CIL? Introduced in April 2010, CIL will operate as a tax on development subject to certain exceptions. Any development undertaken that is greater than 100sq m in floor area, will be charged. It is based on a gross internal floor space calculation. It is likely that more than one single rate of CIL will be applied in any particular area and there will be differential rates for different uses and/or different parts of a Council’s area.

Who can charge CIL? The charging authorities who will impose the levy include District and Unitary Authorities, London Boroughs, The Broads Authority and National Park Authorities. In London, the Mayor will also be able to charge CIL. The charging rate will be determined by the local authority following an assessment of the Infrastructure needs in an area, which will have to take into account whatever other sources of funding are available. Using the Local Development Framework (LDF) and normally an Adopted Core Strategy, local authorities must identify gaps in funding to enable them to arrive at the proposed amount expected to be levied by the CIL. In addition, charging Authorities will also be able to use up to 5% of the funds to recover the costs of administering the levy, collaborate and pool their respected Levies to support Regional Infrastructure, and also borrow against future projected income from the Levy to enable them more time in delivery of Infrastructure.

What is happening in Norfolk? Currently the Greater Norwich Development Partnership (GNDP) are consulting on a draft CIL which will relate to the administrative boundary of Broadland, South Norfolk and Norwich City Councils. This seeks to impose the following rates:

CIL Rates for Consultation (£ per m2)

Residential

£135 to £160 (inner)£75 (outer)

Large Foodstores

£135

Other Retail (A class) Assemblyand Leisure

£25

Residential and non-residential institutions (C2, C2A, D1)

£0

Residential garages (not shared)

£25-35

All other uses including Business (B class), Hotels (C1), PD

£5

Sui generis

In line with similar use class

Where does the money go? Money raised form the CIL is ring fenced for local infrastructure needed to support the development of the area. Each charging authority will publish a list of the specific infrastructure it will invest in.

What is the difference between Section 106 Agreement and Community Infrastructure Levy? The main difference between CIL and planning obligations is that the Levy is intended to provide Infrastructure to support development of an actual area, rather than make individual planning applications acceptable. The Levy will be charged on the basis of “granted” planning permission only or consent granted by the Infrastructure Planning Commission. Whilst planning obligations had to specifically relate to the development site and the consequences of its development. CIL is intended to fund Infrastructure in a given area.

Who is liable? Although the person liable in default will be the landowner (this includes free holders and lease holders with at least 7 years remaining), the regulations encourage (with financial incentives) “assumption” of liability. This may be by the landowner or developer. If there is more than one owner who is liable, then the charging Authority will apportion liability according to relative values. Significantly, an owner of land which is subject of the planning permission for chargeable development may be liable for CIL even though they might not have consented to the relevant planning application.

Are there any exemptions? There are very few limited exemptions. There is mandatory exemptions for charities, where the building is to be used for their charitable purposes and there is no joint ownership with a non charity. There is also proposed to be a discretion for charging Authorities to allow relief where the chargeable development is owned by a charity but for investment purposes.

It is not proposed to exempt others such as, schools or NHS Trusts who would be caught in the came way as a commercial development. It is, however, at the discretion of the charging Authorities to set lower rates for certain types of development where the application of CIL may render development unviable.

Is CIL likely to affect me or my business? It will depend very much on whether you have an intention to undertake development yourself, for example, expand your business premises or whether your potential market is dependant on growth happening in certain locations in Norfolk. For example, if your intention is to extend your premises over 100 sq m in floor area, then you will need to allow for a potential CIL payment to be paid to the chargeable Authority. As you will see from the charging schedule for the GNDP, the requirement for commercial development is relatively limited. In terms of growth, potentially, CIL could act as “break” on potential growth that may happen in Norfolk. If the tariffs for CIL are set at too high a level, there will be no incentive for land owners or developers to bring forward development in the immediate future. The concern of the Chamber is that without any realistic levels being set, there could be a significant reduction in development within the County.

What should I be doing? If you are intending to undertake development in the near future, you need to understand the implications of the CIL Levy. It may be prudent to seek a planning permission before a CIL is imposed in your particular area if you are intending to undertake development yourself. Similarly you need to be aware that if you are negotiating with a landowner/developer on a form of agreement where planning permission is to be sought, it would be prudent to deal with CIL and to agree where liability falls.

The planning and development group of the Norfolk Chamber of Commerce is in discussions with the GNDP and other Councils in an effort to represent the views of members of this important issue.