Tax on Development

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28 May 2010

Since 6 April 2010 local authorities have the right (not the obligation) to charge Community Infrastructure Levy ("CIL") in order to provide a co-ordinated and predictable method for the funding of infrastructure works on developments. 

Payment (possibly by instalments) is triggered by the commencement of development. It is paid by the freehold owner at the time of the commencement of development and he will share liability with any tenants with more than 7 years of their lease to run at the date when planning permission was granted.  There is provision for liability to be "assumed" under contract by someone who does not have a material interest in the land, but if that person fails to pay, the responsibility returns to the owner and his long term tenants.

The collecting authority has a wide range of remedies and enforcement methods if payment is not made including surcharges, interest, stop notices, injunctions, distress and charging orders.  Criminal offences resulting in imprisonment may also be committed. 

How much is to be paid?

We do not know.  The answer to this question depends on each charging authority publishing (after approval from an independent examiner) a charging structure.  This process is likely to take months even for the most determined charging authority.

Does this apply to all developments?

The only exemptions are for small developments of less than 100m2 (except dwellings), and buildings into which people do not normally go or go only intermittently to inspect or maintain fixed plant or machinery.

What effect will it have on landowners?

Landowners will need to think carefully about the potential cost of new farm buildings (even if erected under permitted development rights). They will attract CIL, calculated by reference to the increase in net floor space.

  • CIL will not be payable if the commencement of development predates the publication of the charging schedule.  In the case of buildings erected under permitted development rights there is a "CIL-free" period ending on 5 April 2013.
  • If you are obliged to make a clawback payment, you will want your obligation to pay CIL to be deducted from the notional "profit" which is being shared.
  • s106 Agreements will still be relevant but since 6 April,  the former policy requirements for s106 obligations to be necessary relevant and reasonable have been given the force of law, so aggrieved applicants may be able to challenge the planning authority more easily.
  • Care will need to be taken to attribute liability if a sale might follow shortly after the start of development

The coalition government's position on CIL seems not yet to have been formulated. However, on planning matters it seems to be largely following the path set out in the Conservative Party's pre-election policy paper "Open Source Planning" which sets out the intention to replace CIL with a tariff system.

For further information contact Alastair Morrison on 0117 939 2258 or email

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