The Infrastructure Levy – a new tax on development
As we discussed in our article on the Levelling Up and Regeneration Bill (as it was then), the Levelling-up and Regeneration Act 2023 (LURA) sets out the legislative framework for a new planning levy on development, known as the “Infrastructure Levy” (IL).
It is intended that IL would replace Community Infrastructure Levy (CIL) (except Mayoral CIL in London) and potentially accommodate all financial contributions currently dealt with by way of section 106 agreements.
The LURA inserts new provisions into the Planning Act 2008 (2008 Act). The provisions relating to IL are not currently in force – IL will only come into effect on the introduction of secondary legislation setting out the detail of the Levy (draft regulations have yet to be published).
Fundamentally, the majority of provisions in the LURA relating to IL encompass what future regulations can cover and, as with CIL, the important details will be contained in those regulations. As a result, the provisions relating to IL closely mirror the existing framework in the 2008 Act relating to CIL and do not provide for the mechanics of how IL would actually operate.
We summarise below the key provisions introduced by the LURA in relation to the IL.
Differences between the CIL and IL provisions in the Planning Act 2008
The central intended difference between the IL and CIL, as set out in the government’s consultation paper on Exploring the potential effects of the proposed Infrastructure Levy (February 2023)[1] (Consultation Paper), is that IL would be “values based” (including consideration of increase in land value) whereas CIL is a fixed charge broadly based on net additional floor space. As this distinction is not covered by the LURA (but will come forward through regulations) we do not cover this below.
| Factor | Statutory differences between CIL / IL as set out in 2008 Act |
|---|---|
| Charging authority |
CIL – the local planning authority (LPA) |
| What “infrastructure” the Levy can be spent on |
CIL – (a) roads and other transport facilities, (b) flood defences, (c) schools and other educational facilities, (d) medical facilities, (e) sporting and recreational facilities, and (f) open spaces. |
| Affordable housing |
CIL – as a result of the CIL Regulations, affordable housing is not covered (it is dealt with by way of s106 agreements)
|
| Valuation |
CIL – valuation has no role once a charging schedule is adopted. |
| Thresholds and alteration |
CIL – is charged at a fixed rate specified in the adopted charging schedule (there is no scope for consideration of increased costs etc unless exceptional circumstances relief applies – which is rarely the case). However, the charging schedule allows for different rates for different types of development. |
| Notification of estimated costs |
CIL – as a fixed charge payable on commencement, the charging authority is not required to provide an estimate of the amount CIL chargeable. IL – the charging authority may be required to provide an estimate of the amount of IL that is chargeable (although not specified in the LURA, the Consultation Paper states that IL payments would be made when the development or specified stages are finally occupied). |
| Compulsory adoption |
CIL – the adoption of CIL is discretionary: there is no requirement on LPAs to produce a charging schedule or levy CIL for development. |
| Infrastructure delivery strategy |
IL – a charging authority must prepare and publish an infrastructure delivery strategy, setting out provision, improvement, replacement, operation and maintenance of infrastructure in the authority’s area. |
| Surcharge / penalties |
CIL – the 2008 Act provides for multiple surcharges, for example for non-payment, each limited to the higher of (a) 30% of the CIL payable; and (b) £20,000. |
| Compensation |
CIL – Compensation is payable for loss suffered as a result of enforcement action, including suspension / cancellation of a decision relating to a planning permission and the prohibition of development pending assumption of liability / pending payment of CIL. |
| Miscellaneous | IL regulations may make provision to treat CIL as if it were IL |
[1] Produced by the Department for Levelling Up Housing & Communities
