18 February 2020 - Article
The new Community Infrastructure Levy (‘CIL’) is something that charities which own property need to know about.
Introduced by the Planning Act 2008 and due to commence on 6 April 2010 the CIL is a levy charged on development which local planning authorities has the discretion to apply. The purpose of the CIL is to help fund needed infrastructure identified in the local authority’s development plans.
What will be caught?
The intention is that the CIL will be a charge on developments of over 100m² which can be applied at the discretion of the local authority. Development is defined in section 209 of the Planning Act 2008 as including ‘anything done to or in respect of an existing building’ – it is therefore applicable even in an application for change of use.
When will liability arise?
The party assuming the liability becomes liable for CIL when the development is ‘commenced’ in reliance on planning permission.
What will it cost and who will pay?
It is up to the local authorities to publish their scales of charges to the extent that they decide to impose the levy. The amount of CIL due will be calculated with reference to the charging schedule when a planning permission is granted. The planning permission will determine the number of chargeable units and the charging schedule will determine the rate per unit, so the
liability will be one multiplied by the other. It is the default position that the owners of the land will be liable for the charge. It is proposed that a provision be included to allow a person to volunteer to pay to cater for situations where, for example, a developer proposed to build on land owned by a number of parties.
When will it be paid?
Payment will not fall due until the commencement of the development and the exact details of how payments will be made will be included in the regulations, but it is expected that there will be provisions allowing for the collection of the fee to be either on account or in instalments.
What about existing planning permission consent which has not been implemented?
Before a CIL can be charged on a development the local planning authority in question must have adopted a CIL Development Plan Document. If planning permission has been granted before such a Development Plan Document has been adopted the CIL is not triggered.
The Department of Communities and Local Government held a 12 week consultation which closed on 23 October 2009 on the draft regulations which will bring the CIL into effect. As the consultation has only just closed we do not know yet how many of the proposals outlined in the consultation will make the final cut or indeed how many of the concerns or issued raised by charities responding to the consultation will be dealt with but in the meantime we have outlined below the proposals which directly impact charities.
Exemption for charities
Charities will be relieved to learn that the Planning Act 2008 provides for an exemption for charities although a close inspection of the draft regulations shows that it is perhaps not as straightforward as one might have hoped. On the positive side:
- There is a mandatory exemption where the development is to be carried out and used in furtherance of the charity’s charitable purposes.
- The exemption applies to Scottish, Northern Irish and unregistered charities.
- Where a charity leases part of a building which is subject to re-development the CIL will be reduced by the proportion of the building leased by the charity. The charity will not have to pay the charge but the non-charity owners will have to pay a proportion corresponding to their interests.
- The charity can let out up to half of the building without jeopardising its exemption – the exemption is only lost where the land is used ‘wholly or mainly’ for non-charitable purposes and ‘mainly’ is generally interpreted as meaning ‘more than half’.
- Local authorities have a discretion as to whether the exemption should apply to properties which are held as investments.
- The relief will not apply at all where a charity co-owns a particular interest in property with a non-charity
- There is no retrospective relief so an exemption must be claimed before the commencement of the development.
- There is a clawback of the relief if the charity ceases to be eligible for the exemption within 7 years.
- The exemption will not apply where a charity offers to pay the charge on behalf of the developer as the exemption can only apply where the charity is the ‘default liable party’.
Points of concern
A review of the draft regulations does raise a number of issues which are of a concern to charities including:
- The exemption does not extend to trading subsidiaries, community interest companies or where a company is holding land on behalf of an unincorporated charity.
- There are no provisions allowing an exemption to a developer if the development is being carried out on a charity’s behalf.
- The provisions allowing individual local authorities the discretion over what constitutes ‘investment’ property and whether or not to extend the exemption to that property subjects charities to a ‘postcode lottery’ as to whether the CIL will be charged.
- The clawback provisions could have been modelled more closely on the SDLT equivalent.
- There will be no general exemption for infrastructure development such as the construction of new hospitals or schools.
We must now wait to see what the response from the Department of Communities and Local Government is to this consultation and in particular whether the concerns which have been raised by charities have been taken into account in the final drafting. For charities holding land or planning to hold land in the future which might be subject to re-development, this is certainly one to watch.