Levy with an escape route

What is the community infrastructure levy?

CIL is a local government tax paid by developers intended to allow local authorities to fund infrastructure. It will sit alongside section 106 agreements to secure funding for off-site infrastructure, while site commitments, such as provision of affordable housing, will continue to be agreed using section 106 deals.

When will the CIL be introduced?

It goes live on 6 April 2010. However, there is no requirement on councils to charge the CIL, so it may never be imposed in some authority areas, or at least not for some time.

When does the CIL arise?

It arises on most developments where planning permission is granted, and once development gets underway.

Any reliefs for affordable housing?

Social housing relief exists for ‘qualifying dwellings’. They must satisfy at least one of the following conditions:

• the dwelling is let by a private registered provider, registered social landlord, or local authority and is let on one of the specified forms of tenancy. Note that not all tenancies and lettings are covered, for example, Rent Act tenancies or hostel licences;
• the dwelling is let on shared ownership terms. Only this condition envisages a broader range of affordable housing providers, such as for-profit organisations, arm’s-length management organisations and local housing companies.

SHR must be applied for in respect of each development - it is a relief, not an exemption. The local authority must approve a claim for SHR before the development begins, and although the council must respond ‘as soon as practicable’, this may delay some developments. SHR is not retrospective so private developers wishing to mitigate the CIL in respect of the affordable element must strike deals with affordable housing providers before development begins, or pay the CIL.

SHR is subject to clawback where, within seven years of the development commencing, the dwelling ceases to qualify. Exceptions apply, for example, where the proceeds of sale are spent on a qualifying dwelling.

Is there anything else that might help?

An exemption exists for charities using the development ‘wholly or mainly for charitable purposes’ and there is a discretionary relief where the charity holds the land as an investment.

This is an exemption and may place qualifying charitable affordable housing providers in a better position. It requires an application to the local authority and is subject to the seven-year clawback.

Will the CIL survive the next election?

The Conservative Party proposes to replace the CIL with a local tariff tax where a charge is made for each new home or square foot of development. So the CIL may be shortlived.

Neil Cohen is a partner at Trowers & Hamlins ncohen@trowers.com

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