The Community Infrastructure Levy: What you need to know
Don’t fall foul of an avoidable pitfall, says self-build expert Michael Holmes, who leaves no stone unturned with his comprehensive advice on applying for self-build CIL exemption
The Community Infrastructure Levy (CIL) is a charge which can be levied by local authorities on all new development in their area, including new homes, with the aim of supporting local infrastructure.the average CIL charge in England is currently £95/m2, so the CIL liability on the average self-build home measuring 247m2 is an eyewatering £23,465!
When CIL was introduced, it applied to all new homes and took many self-builders by surprise as its introduction had not been widely advertised outside of the development industry.the good news is that, thanks to lobbying by the National Custom and Self Build Association (NACSBA) and Homebuilding & Renovating, a self-build exemption was introduced in 2014, giving full relief from CIL for
people building or commissioning a new dwelling for their own occupation, providing they follow the regulations.
The self-build exemption was granted in recognition of the exceptional costs of designing and building a single dwelling, or individual dwellings, on serviced plots, compared to building a larger development of standard house types.
The problem is that, unlike planning where the system is arguably flexible and forgiving for self-builders, the CIL regulations are applied with rigor and precision, and if not followed precisely, the full CIL charge becomes payable.
There is no appeals process for a failure to comply with the regulations and inevitably, as a consequence, there have been multiple incidences of self-builders finding they are liable to pay charges, in some cases costing £10,000s.the unexpected cost can have catastrophic implications for a selfbuild project, with some self-builders forced to scale back their project or abandon it altogether and sell.
WHAT YOU NEED TO KNOW
This guide is designed to help explain the exemption process, and common mistakes to avoid. Once you’ve read the advice, follow the four-step process on page 125.
THE PAPERWORK
Following the introduction of the CIL by a charging authority, all applicants for full planning permission, including householder applications, reserved matters applications following an outline planning permission (see page 121), and applicants for lawful development certificates, are required to complete a ‘CIL Additional Information’ (CIL Form 1).Without this form, the application will not be registered as valid.
Form 1 is used to calculate the CIL liability for the development based on the net additional gross internal area (GIA) in square metres that will result from the development, multiplied by the relevant rate in the LA’S published charging schedule, available on their website.
If you make your own planning application, you will establish and provide this information yourself, but more often it will be your agent, such as your designer or planning consultant, who completes the forms.there is a section to complete on CIL Form 1 informing the authority of your intention to claim the self-build exemption.
The authority should issue the CIL liability notice as soon as practical after the date when the development is first permitted by the planning permission. This is important, as it informs you of the amount of the CIL liability claimed by the authority and provides information needed to complete the commencement notice (CIL Form 6). If you do not agree with the amount charged in the CIL liability notice, you can make an appeal but because of the self-build exemption, such appeals are unusual.
HOW MUCH YOU MIGHT BE CHARGED
CIL was introduced in 2008 as a way of raising funds to deliver, operate and maintain the new infrastructure, such as roads and schools, required to support new development. As of January 2020, 167 local authorities in England and three in Wales have adopted CIL schedules, and over 89 have published or submitted draft charging schedules for consultation. Around one third of authorities are currently without any published plans for CIL. It isn’t levied in Scotland or Northern Ireland.
To find out whether your local authority charges CIL or has plans to introduce CIL, visit the planning pages on their website, or call the planning department and ask them to send you details of their CIL schedule or draft CIL schedule.
In the highest charging areas, mostly in Greater London, the CIL charge can be up to £750/m2 (Kensington and Chelsea).
In Greater London, in addition to the local authority CIL, the Mayoral CIL is also levied to cover the cost of Crossrail, adding up to £80/m2 more to CIL, or £19,760 for the average self-build home.
DISQUALIFYING EVENTS
The regulations drafted for the exemption are designed to ensure it cannot be abused by developers building for profit. Applicants claiming the exemption are required to sign a legal declaration that the project is a self-build and to provide evidence that this is the case within six months of the date of completion. In the event that the property is sold, or the whole property let out, within three years,
a disqualifying event has occurred and the exemption is revoked and the full CIL charge becomes payable.
If a disqualifying event occurs, you must notify the charging authority in writing within 14 days.where this is not done, in addition to the chargeable levy amount a surcharge equal to 20% of the chargeable amount or £2,500, whichever is the lesser, may be applied.when the charging authority receives the notification, it must copy it to the collecting authority, if this is not the charging authority. If the exemption is withdrawn you must pay the full levy.
HOW TO AVOID COMMON ERRORS
There are a number of circumstances which can catch self-builders out when it comes to CIL — here are some of the most common.
● COMMENCING YOUR PROJECT PRIOR TO EXEMPTION BEING GRANTED
The most common error is commencement of development prior to securing the exemption. Once work has commenced it is not possible to retrospectively apply for a self-build exemption.
This can be done innocently or inadvertently because the self-builder is not aware of the liability or the process. It can also result from misunderstanding what works constitute a lawful commencement — for instance, undertaking demolition work approved as part of a permission is classed as commencement. The rules surrounding what constitutes commencement are very precise, and are set out in Section 56 of Part III of the Town and Country Planning Act 1990.
Even after the self-build exemption has been granted, it can be rescinded if the charging authority does not receive the correctly completed Notice of Commencement (Form 6) prior to the commencement of works.this simple clerical error or oversight has resulted in some self-builders losing the exemption and having to pay the full CIL charge. It’s always worth double-checking whether the charging authority has received this and obtaining proof of postage.
Recent changes to the CIL regulations passed in 2019 have improved the situation for those with a CIL liability issued on or after 1 September 2019. A failure to submit Notice of Commencement (Form 6) no longer triggers the full CIL charge but instead incurs a surcharge of £2,500 or 20% of the CIL Charge — whichever is lower.
Failure to ensure the charging authority has received Form 6 for a permission with CIL liability notice dated before 1 September 2019 will still result in the full CIL liability being charged.
AMENDING AN EXISTING PLANNING PERMISSION
Applications to remove or vary conditions on an existing planning permission is another area that can catch out selfbuilders and result in loss of the exemption. This includes applications under Section 73A of the Town and Country Planning Act 1990 to vary planning conditions to allow amendments to approved drawings. This is used to regularise minor material alterations to the design, such as small non-material changes to the siting of the new dwelling, or changes to the door and window arrangements, or small enlargements or reductions in scale.
Section 73 applications are treated as a new permission with a revised CIL liability reflecting any net changes to the GIA in square metres compared to the original permission.the CIL liability for a Section 73 permission may have increased or decreased depending on the approved plans.the charging schedule used is the one that applied at the time of the original CIL liability for the permission being varied. An application for exemption for any difference between the value of the exemption and the new CIL liability arising from the Section 73 permission can be made, providing the development has not commenced.
If the original planning permission that is being varied by the Section 73 approval has already commenced, the subsequent approval under Section 73 for amendments is treated as having commenced on the same date work commenced on the original ‘parent’ application. As a result the new CIL liability cannot qualify for the selfbuild exemption.
Under the revised CIL regulations 2019, permissions with a CIL liability issued after 1 September 2019 that have already been granted the self-build exemption, can have an exemption that has been granted transferred to the new CIL liability at the same value.
If the development has already commenced, a surcharge equal to 20% of the notional CIL chargeable amount or £2,500, whichever is the lower amount, will be incurred. Any difference in CIL liability is also payable.
If, however, the CIL liability was issued before 1 September 2019 and work on the original ‘parent’ permission has already commenced, the exemption previously granted is rescinded and the full levy charge is payable. This situation can arise unexpectedly and through no fault of the self-builder, for instance, because the council has requested a retrospective planning application to regularise works that are non-compliant.
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If the property is sold within three years, a disqualifying event has occurred and the exemption is revoked and the full CIL charge becomes payable