Community Infrastructure Levy (CIL) - New Year, new rules!

New Year, new rules!  As from the 1^st January 2020 there has been a new process in place to uplift the Community Infrastructure Levy (CIL) rates – from the ‘headline rate’ published by the respective Local Planning Authority (LPA), at the date of adoption, to the date of planning permission. 

The uplift was originally designed to ensure that CIL rates were effectively maintained overtime – an inflation measure.  However, the ‘old’ mechanism – that was in place to the 31 December 2019 - created significant levels of confusion and was based upon the RICS All-in Tender Price Indices (TPI) published by the Building Cost Information Service (BCIS), as part of the Royal Institution of Chartered Surveyors (RICS).    

The RICS has now created a CIL specific index, to be known as the RICS CIL Index and published in October each year; applying from 1^st January for planning permissions granted anytime in the following year. The current, and first, index figure is set at 334 for 2020.

Historically, the old basis was seen as too confusing by both LPAs and CIL payers alike; and had led to proposals across various consultations to amend the indices to use the Consumer Price Index (CPI) and/or House Price Index (HPI).  Thankfully those proposals were rejected and would have made the situation far worse! 

In reality, many CIL payers had little awareness or understanding that the ‘headline CIL rates’ were uplifted, and often reviewed or challenged their Liability Notices because the rates used were higher than the published Schedule of Charge Rates. Others simply didn’t understand the workings of the BCIS TPI. The problem with using the BCIS All-in TPI index was down to it being a ‘live’ database.  This meant that index figures over the last 12-18 months could change depending upon new projects being uploaded into the data set. Hence, if the developer looked at the TPI rate in one week and the council some weeks later, they may both have had different values for the uplift factor.  Albeit the RICS, tries to ‘fix’ the index figures after 18 months.

Officially, the TPI used for the planning permission was that as at the preceding 1^st November (4Q) to the planning permission date, although we have found numerous cases of various LPAs incorrectly applying a rate as at the date of planning permission, resulting in the CIL figures then being incorrect, whether too high or low!

With the CIL Index now being a fixed annualised figure, and most LPAs having adopted their CIL regimes more than 18 months ago, this should significantly reduce uncertainty for property owners, developers, planning officers and advisers.

To calculate the CIL liability the following formula (as set out in Reg 40) is used:

The amount of CIL chargeable at a given relevant rate (R) must be calculated by applying the following formula

R x A x I_P

I_C

where—

A = the deemed net area chargeable at the ‘headline’ CIL rate R,

I_p = the index figure for the year in which planning permission was granted (now 334 for 2020)

I_c = the index figure for the year in which the LPAs charging schedule containing the ‘headline’ CIL rate R was adopted.

Mathematically, the formula is not that confusing, but LPAs and the Government have generally been very poor at communicating these mechanisms – leaving householders and developers bewildered by template letters and forms that are derived from complex and convoluted Regulations. Thankfully, some LPAs are now starting to use clearer forms and setting out all the relevant details on their Liability Notices – showing the calculations in full – not simply the answer.

If you or any of your clients are contemplating a significant new residential or commercial project in a location across England & Wales where the Local Planning Authority has adopted CIL, then do get in touch to see how we could help you in ensuring your CIL liability is properly calculated and to explore any mitigation strategies that may be possible enabling you to save money.