The Community Infrastructure Levy (CIL) is a development tax introduced in England and Wales in 2010 to support local authorities in funding the necessary infrastructure for new developments in their areas. Local governments can impose this charge on most types of new development, allowing them to secure funds for essential services that will benefit the growing population. The CIL has been a significant tool in ensuring that local communities can maintain their quality of life and access to resources, even as new residential, commercial, and industrial projects are established.
Purpose and Rationale
The CIL was created to provide a fair, transparent, and predictable way to fund infrastructure improvements that meet the demands of increased development. The primary purpose of the CIL is to make sure that local communities can benefit from, and sustain, the influx of people, businesses, and services associated with growth in the area. Infrastructure is crucial to supporting both local economies and community well-being. Roads, schools, healthcare facilities, parks, and other public resources are essential for thriving communities, and as new developments are established, they put additional strain on these resources.
Unlike the previous approach, which primarily relied on Section 106 agreements, the CIL provides a more straightforward, upfront charge that developers pay based on the size and type of their projects. Section 106 agreements are still in use but are typically reserved for site-specific obligations rather than wider infrastructure funding. The CIL provides a clearer path for local governments to gather resources, enabling them to budget and allocate funds for key infrastructure projects that serve the community as a whole.
Scope and Applicability
The CIL applies to most new developments that create additional floor space of 100 square meters or more. In the case of new dwellings, however, the levy is applied regardless of the size, ensuring that all housing developments contribute to the local infrastructure. The charge generally applies to both residential and non-residential developments, including commercial and industrial projects, although there are exceptions and reliefs available (which will be discussed later).
The CIL charge is levied at the planning stage, meaning developers are aware of the costs before they commence work. This transparency helps developers make informed financial decisions and allows local councils to project how much revenue they can expect from developments in their jurisdiction.
Calculating the CIL Charge
One of the distinctive aspects of the CIL is that it is calculated based on a “charging schedule” set by each local authority, which considers the infrastructure needs and development patterns within its boundaries. The rate of the CIL varies between different areas and often between types of development within the same area. For instance, high-demand residential areas may have higher rates compared to low-demand areas, and commercial or retail developments might be charged at different rates than industrial or office spaces.
Local authorities determine CIL rates on a per-square-meter basis, so larger developments naturally incur higher charges. This square meter calculation allows the levy to scale with the size of the development, ensuring that those which will place the greatest demand on infrastructure contribute proportionately. Each authority’s charging schedule is subject to public consultation and examination by an independent examiner before it can be adopted. This process is meant to ensure fairness and that the rates are set in accordance with local economic viability, balancing the need for infrastructure funding with developers’ capacity to pay.
It should be noted that in Greater London developers may be obliged to pay Mayoral CIL and also any CIL levied by the London Borough in which the development is proposed.
Exemptions and Reliefs
Although the CIL is broadly applied to new developments, there are specific exemptions and reliefs designed to encourage certain types of development or to reduce the financial burden on particular projects. These exemptions and reliefs help ensure that the levy does not unintentionally discourage developments that may be beneficial to the community.
1. Minor Developments: Generally, developments under 100 square meters that do not create a new dwelling are exempt from the CIL. This exemption is intended to relieve small projects, which may not significantly impact infrastructure demands.
2. Self-Build Homes: Self-build projects are often granted relief from the CIL. This includes homes built by individuals for their personal use, as well as residential annexes and extensions. Self-build exemptions help support individual home builders and allow for small-scale, personal projects without the additional burden of CIL costs.
3. Charitable Developments: Charities developing property for charitable purposes may also qualify for exemptions. This provision helps charities maximize the benefits of their investments in local communities, particularly in cases where they are developing facilities like community centers, affordable housing, or other projects with direct public benefit.
4. Affordable Housing: Projects that provide affordable housing are typically exempt from the CIL, in line with government goals to address housing affordability and support vulnerable groups. This exemption supports the creation of low-cost housing options, which are essential to meeting the needs of the community without increasing the cost burden on the developers.
Use of CIL Funds
The funds collected through the CIL are allocated to infrastructure projects within the local area, supporting development in ways that benefit the community directly. Local authorities are required to publish an “Infrastructure Funding Statement” each year, which outlines how they plan to use the CIL revenue and provides transparency around infrastructure priorities. The types of infrastructure that can be funded through the CIL are varied, and local councils are given discretion to address their specific needs. Common uses of CIL funds include:
1. Transport Networks: Improving roads, bridges, public transit systems, and other aspects of the transportation network is a frequent priority. Effective transportation infrastructure supports local economies and helps prevent congestion issues that can arise from increased development.
2. Educational Facilities: With more residents comes the need for expanded educational facilities. CIL funds can be used to build new schools, expand existing ones, or provide additional resources that support a growing student population.
3. Healthcare Services: Growing communities require expanded healthcare services, from clinics and hospitals to mental health facilities. CIL revenue can help fund these essential services, ensuring that residents have access to adequate healthcare.
4. Parks and Public Spaces: Parks, recreation areas, and other public spaces are integral to community well-being. CIL funds allow local authorities to create or enhance these spaces, providing areas for relaxation, exercise, and community events.
5. Flood Defenses and Environmental Protections: In areas where development may increase flood risks or impact local ecosystems, CIL funds can be directed toward flood defense projects, drainage systems, and other environmental protections.
Benefits and Limitations of the CIL
The Community Infrastructure Levy has proven to be an effective way to ensure that new developments contribute to the wider community by supporting necessary infrastructure. The transparency of the CIL process—where developers know the charge from the outset—provides a level of predictability that was lacking under the previous reliance on Section 106 agreements. Additionally, because the CIL is applied to almost all types of development, it provides a more equitable system where every new project contributes to the community’s infrastructure needs.
However, there are some limitations to the CIL. Not all local authorities have adopted the levy, often due to challenges in determining appropriate rates or because they prefer using Section 106 agreements for specific projects. Additionally, while the CIL provides essential funds, it is rarely enough to cover all infrastructure needs, meaning local authorities must often seek additional funding sources. The flexibility to set local rates can also create discrepancies between neighboring areas, with some regions potentially setting rates too low to cover their infrastructure needs or too high, discouraging development.
Conclusion
In summary, the Community Infrastructure Levy is a tool for local authorities in England and Wales, enabling them to raise funds to support infrastructure improvements and meet the demands of growing populations. By charging developers based on the size and type of their projects, the CIL ensures that new developments contribute to the community resources they depend on.
From 2010 to 2017, 138 local authorities in England and Wales had adopted the Community Infrastructure Levy (CIL), while nearly 230 had published draft charging schedules for consultation. The Planning Resource website maintains a “CIL Watch” map and database, offering up-to-date information on local authorities’ CIL adoption status.
