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The Infrastructure Levy - a new planning tax

The Government first set out its initial proposals for a new planning levy on development in its 2020 White Paper. The framework legislation for the new Infrastructure Levy (IL) was contained in the Levelling Up & Regeneration Bill which is currently before Parliament, having been introduced to the House of Commons on 11 May 2022.

The Government has recently published a technical consultation intended to inform secondary legislation to regulate IL. It is seeking views by 9 June here.

What is the current system?

At present, developers may find themselves paying:

  • financial contributions by way of section 106 agreements; and 
  • Community Infrastructure Levy (CIL) where levied by local and / or other authorities, including Mayoral CIL in London.

S106 contributions are negotiated between local planning authorities and developers at the time of grant of permission, whilst CIL is a fixed charge based broadly on the net additional floor space of a development and rates set out in a charging schedule adopted by the relevant charging authority, usually payable on commencement of development.

What is proposed?

The new levy, IL, is proposed to be calculated on the final gross development value of a scheme. The Government is of the view that the advantage of imposing a fixed charge, reflecting the latest market position, will ensure better capture of land value uplift. However, by basing IL liability on final GDV an applicant will not know what it owes until the development has completed/sold.

What will Infrastructure Levy fund?

The Government intends to delineate between:

  • Levy-funded” infrastructure - being infrastructure funded to support the local area, such as local transport services; and
  • Integral” infrastructure - meaning infrastructure that is needed for a site to function, such as open space for residents of the proposed development.

The consultation details that the delineation between these two sets of infrastructure will be set out through regulations, policy and guidance.

Levy-funded infrastructure will be funded by IL, whilst integral infrastructure will be provided via planning conditions.

How will Infrastructure Levy work alongside s.106 and CIL?

One of the advantages of IL, according to the Government, is that it is a fixed charge which will “sweep away” months of time negotiating agreements. However, the consultation acknowledges that there will be some situations which still require a negotiated approach. Therefore, to set a distinction as to the use of agreements depending on the circumstances, the consultation details three “routeways” for how infrastructure will be delivered. However, all three routeways still envisage use of s.106 agreements (or what will be deemed “Delivery Agreements”) in some capacity.

The routeways are:

(i) the core routeway with a narrow application of s.106 and reliance on IL as a cash-based system,

(ii) the infrastructure in-kind routeway where s.106 agreements are used to deliver IL infrastructure for complex sites, and

(iii) the s.106-only routeway, for sites not subject to IL.

At present s.106 agreements are used to facilitate a wide range of matters, including the provision of affordable housing, open space and biodiversity mitigation, extending beyond s.106 contributions. In light of this, it is unclear how precisely the Government intends for “Delivery Agreements” only have a “narrow” application.

Mayoral CIL is also still expected to remain in London - potentially creating a high administrative burden for authorities juggling both Mayoral CIL and new IL charging schedules.

What will Infrastructure Levy apply to?

CIL applies (in essence) to new buildings or development of existing buildings above a certain threshold. IL is intended to be charged on a greater scope of infrastructure. For example, the consultation envisages that it may be possible to charge IL (although at a lower rate) on a change of use, in order to recognise the change in land value.

Therefore, IL charging schedules are likely to be very complex documents with multiple rates and thresholds for different types of development. The risk is that it is likely to be harder for a layperson, at initial glance, to determine if their proposed development will be subject to IL.

How will the Infrastructure Levy rates work?

How much CIL you pay is determined by the CIL charging schedule applicable in your geographical area. In contrast, IL will be impacted by multiple factors – notably the increase in land value, the type of development (as noted above) and affordable housing need (as discussed below). This may result in not only a greater administrative burden on authorities, but potentially more challenges to liability amounts if schedules are unclear.

When will Infrastructure Levy be due?

CIL is due on commencement of development, whilst it is envisaged that payment of IL will be required prior to first occupation of the development. This late trigger for payment may assist developers to better plan their cash flow but it could also delay the delivery of infrastructure given that local authorities will have longer to wait for the funds. To mitigate this risk, local authorities are expected to have access to a fund they can borrow against – but it remains to be seen what the take up would be for such a borrowing facility.

The initial IL payment may then be followed by a further adjustment payment to more accurately reflect final GDV. However, there is little detail in the consultation to explain precisely how and when GDV will be fixed, and whether there will be any sort of multi-party valuation exercise. Secondary legislation will likely inform these issues.

Affordable Housing

Payment of IL will require a percentage to be delivered in-kind as affordable housing. The consultation sets out that local planning authorities will be given a “right to require” – allowing them to dictate what proportion they want as affordable housing, and what proportion they want as cash.  

The consultation indicates that authorities will produce Infrastructure Delivery Strategies alongside their IL charging schedules which will set out their right to require.

The Government’s intention is to put the control back in a local authority’s hands – rather than allowing viability assessments to be submitted with the effect of reducing the amount of affordable housing delivered. However, the reality is that, due to the inevitable time that passes from a grant of planning permission to completion of development, a development may only become viable through reduced affordable housing provision.


The intention is for IL to be introduced first via a “test and learn” process for a small number of authorities before being implemented by all English authorities over a ten-year period (it will be mandatory in contrast to CIL). One can only hope that this delayed roll out will create a more streamlined system, in comparison to the complex CIL regime.

The Government’s consultation closes on 9 June.

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