Avoid the levy
Social landlords should be exempt from paying the community infrastructure levy, but they must be vigilant, says Karen Howe
Over the next 12 months, local authorities are expected to embrace the government’s new community infrastructure levy.
Although officially introduced almost two years ago, to date only three authorities have imposed the local development land tax.
In theory, social landlords are exempt from the CIL, but the relief is not automatic and mistakes in the application process could be costly.
What is CIL?
The charge is set at a rate per square metre by the relevant local authority. Currently, rates vary between £45 to £105 per square metres - with London set to be significantly higher.
It is spent on the provision and maintenance of infrastructure such as roads and schools, ensuring the community benefits from new developments.
How does this affect social housing?
In most cases, social housing will be exempt but the relief needs to be claimed by the landowner who must formally assume liability to pay the levy. If they refuse to do so non-payment can carry a custodial sentence.
If the housing has been built by a developer who then transfers units to a landlord, only the developer can claim the exemption. The relief would be cancelled if development began before the local authority had given the official green light on the CIL exemption.
There is also a clawback period of seven years from the start of any development during which relief may be withdrawn. This will usually occur if a tenant increases their stake in the property to 75 per cent or if the unit is sold outright.
Karen Howe is a senior associate at Clarke Willmott