When new developments happen developers are usually asked to pay a contribution towards the funding of associated infrastructure. Historically this was through 'Section 106' agreements negotiated between local authorities and developers although the Planning Act 2008 introduced a new way of doing this - the Community Infrastructure Levy, or CIL.
Section 106 agreements
S106 contributions remain the primary means to ensure that developments pay for infrastructure that supports them. However S106 agreements are by their nature uncertain in terms of what they can deliver. S106 contributions are negotiated between the local authority and the developer and can pay for anything from new schools or clinics to roads and affordable housing.
The Community Infrastructure Levy (CIL)
Introduced by the Planning Act 2008, local authorities are allowed but, not required, to introduce a CIL. CIL is different to S106 payments in that it is levied on a much wider range of developments and according to a published tariff schedule. This spreads the cost of funding infrastructure over more developers and provides certainty as to how much developers will have to pay. It is simpler and more transparent.
CIL is now the preferred method for collecting pooled contributions to fund infrastructure. S106 agreements have been scaled back to just cover site regulation and site specific issues (whether or not the local authority has introduced a CIL) and are subject to a statutory test since 2014. CILs cover the generic payments that a development imposes.
CIL only applies in areas where a LPA has a charging schedule in place which sets out its CIL rates. Any local authority that charges the levy must publish a charging schedule on its website. Since CIL is a discretionary charge, there continues to be a phased take-up of CIL by local authorities, but local authorities continue to be encouraged to adopt a CIL.
The advantage of the CIL is the rate is transparent and does not need to be negotiated. To ensure developers do not pay for the same infrastructure under both schemes, local authorities are required to publish a list of what will be funded by the CIL and those items cannot be covered by a S106 agreement.
CIL is paid primarily by owners or developers of land that is developed. In an area where CIL operates, most new development which creates net additional floor space of 100 square metres or more, or creates a new dwelling, is potentially liable for the levy. Some development is eligible for relief or exemption from CIL such as residential extensions and houses and flats which are built by self-builders. There is however a strict criteria that must be met and procedures followed to obtain the relief or exemption.