The Community Infrastructure Levy (CIL): A Comprehensive Examination of its Framework, Operation, and Impact in the United Kingdom

Many thanks to our sponsor Focus 360 Energy who helped us prepare this research report.

Abstract

The Community Infrastructure Levy (CIL) represents a cornerstone of the United Kingdom’s land use planning and development finance system, meticulously crafted to ensure that new developments contribute equitably to the provision of essential infrastructure. This report undertakes an exhaustive analysis of CIL, dissecting its legislative genesis, overarching purpose and objectives, and the intricate mechanisms governing its application. It meticulously details the criteria triggering CIL liability, the methodologies employed for its calculation, the comprehensive suite of available exemptions and reliefs, and the stringent formal payment procedures. Furthermore, the report delves into the multifaceted financial and strategic implications of CIL across diverse development typologies and scales, offering insights into its role in shaping urban growth and infrastructure delivery. By illuminating these critical facets, this document seeks to furnish a deeply nuanced understanding of CIL’s pervasive influence and operational dynamics within the contemporary UK development landscape, alongside its ongoing evolution and potential future trajectory.

Many thanks to our sponsor Focus 360 Energy who helped us prepare this research report.

1. Introduction

The Community Infrastructure Levy (CIL) was formally introduced in England and Wales through the Planning Act 2008 [Planning Act 2008, c. 29] and subsequently operationalised by the Community Infrastructure Levy Regulations 2010 [The Community Infrastructure Levy Regulations 2010, No. 948]. This legislative framework established a standardised, tariff-based system for securing financial contributions from developers, earmarking these funds for local and sub-regional infrastructure provision. The advent of CIL marked a significant paradigm shift from the prior reliance on Section 106 agreements, aiming to foster greater transparency, predictability, and efficiency in infrastructure funding.

Prior to CIL, Section 106 of the Town and Country Planning Act 1990 [Town and Country Planning Act 1990, c. 8] served as the primary mechanism for securing developer contributions. These agreements, negotiated on a case-by-case basis between local planning authorities and developers, were designed to mitigate the direct impacts of specific developments. However, this system attracted considerable criticism for its perceived lack of consistency, complexity in negotiation, and occasional insufficiency in addressing broader infrastructure needs beyond the immediate impact of a single scheme. Developers frequently decried the protracted negotiation timelines and the inherent uncertainty of contributions, which could significantly affect project viability and land values. Local authorities, conversely, struggled with the administrative burden and the limitations on pooling contributions from multiple schemes for larger, strategic infrastructure projects [Department for Levelling Up, Housing and Communities, 2024a].

Recognising these systemic shortcomings, the government sought a more streamlined and equitable approach. Influential reviews, such as the Barker Review of Housing Supply (2004) and the Killian Pretty Review of the Planning Application System (2008), highlighted the necessity for a more predictable and broadly applicable charge on development. CIL emerged as the response, intended to be a non-negotiable charge, applied to most new developments, thereby providing local authorities with a more robust and predictable funding stream for the infrastructure required to support growth. This report systematically unpacks the intricacies of this levy, from its foundational principles to its practical implementation and wider socio-economic implications.

Many thanks to our sponsor Focus 360 Energy who helped us prepare this research report.

2. Purpose and Objectives of CIL

CIL was conceived to address a critical challenge inherent in urban development: the perennial need to fund essential infrastructure that accompanies and enables growth. As communities expand and new homes and businesses are created, there is a commensurate demand for improved roads, public transport, schools, healthcare facilities, green spaces, and flood defences. Without adequate infrastructure, development can strain existing resources, diminish quality of life, and ultimately hinder sustainable growth. CIL provides a mechanism to ensure that those who benefit from increased land values arising from planning permission contribute towards these communal necessities.

2.1 Addressing Section 106 Limitations

The primary impetus for CIL’s introduction was the perceived inadequacies of Section 106 agreements. While Section 106 agreements remain vital for securing site-specific mitigation measures and affordable housing, their broader application for general infrastructure funding was problematic. The key criticisms included:

• Complexity and Lack of Transparency: Each Section 106 agreement was a bespoke legal document, often resulting from lengthy and opaque negotiations. This made it difficult for the public to understand what contributions were being secured and how they would be spent. For developers, the uncertainty added significant risk to project appraisal [Planning Advisory Service, n.d.].
• Inconsistency: Contributions varied significantly between local authorities and even between similar developments within the same authority, leading to perceptions of unfairness and an unlevel playing field.
• Insufficiency and Pooling Restrictions: Section 106 contributions were restricted to mitigating the direct impacts of a specific development. Regulations limited the ability of local authorities to pool more than five Section 106 agreements for a single infrastructure project [Department for Levelling Up, Housing and Communities, 2024a]. This hampered the funding of larger, strategic infrastructure projects that benefited multiple developments and the wider community.
• Administrative Burden: The negotiation and monitoring of individual Section 106 agreements imposed a significant administrative burden on both local authorities and developers.

2.2 Core Objectives of CIL

CIL was designed to overcome these challenges by offering a more systematic, transparent, and predictable approach to infrastructure funding. Its core objectives include:

• Funding Infrastructure Needs: At its heart, CIL aims to ensure that the infrastructure required to support new development is adequately funded. The definition of ‘infrastructure’ under CIL is broad, encompassing transport, flood defences, schools and other educational facilities, medical facilities, open spaces, parks and recreational facilities, and any other facilities that support development. Local authorities are required to publish an annual Infrastructure Funding Statement (IFS), detailing how CIL (and Section 106) funds have been spent and what infrastructure projects they intend to fund [Department for Levelling Up, Housing and Communities, 2024b]. Furthermore, a significant proportion of CIL revenue (15%, rising to 25% in areas with a neighbourhood plan) is passed directly to local parish or town councils, known as the ‘neighbourhood portion,’ to fund local priorities identified by the community [Department for Levelling Up, Housing and Communities, 2024a].
• Transparency and Fairness: CIL operates on a published charging schedule, which clearly sets out the rates per square metre for different types of development and geographical areas. This transparency allows developers, landowners, and the public to ascertain potential liabilities in advance. The non-negotiable nature of the charge ensures a consistent application across similar developments, promoting a sense of fairness and reducing the scope for arbitrary decision-making. The ‘polluter pays’ principle is embedded, whereby those who generate the need for new infrastructure contribute to its provision.
• Simplicity and Predictability: By adopting a fixed tariff system, CIL reduces the need for protracted negotiations typical of Section 106 agreements. This provides greater cost certainty for developers, enabling them to factor CIL liabilities into their viability appraisals and land purchase decisions at an earlier stage. For local authorities, it offers a more predictable revenue stream, aiding long-term infrastructure planning and budgeting. While the calculation involves several steps, the underlying principle is a straightforward per-square-metre charge.
• Support for Plan-Led Development: CIL is intrinsically linked to the local plan-making process. Charging authorities must demonstrate that their proposed CIL rates are evidence-based, taking into account the costs of infrastructure and the economic viability of development within their area. This ensures that CIL supports, rather than hinders, the delivery of the local plan’s growth objectives and contributes to strategically planned infrastructure provision [Department for Levelling Up, Housing and Communities, 2024a].

In essence, CIL seeks to create a more efficient, transparent, and equitable framework for infrastructure funding, shifting from a primarily reactive, site-specific mitigation model to a proactive, growth-enabling approach that integrates developer contributions into the broader strategic planning process.

Many thanks to our sponsor Focus 360 Energy who helped us prepare this research report.

3. Triggering CIL Liability

CIL liability is a statutory obligation triggered by specific development activities, as defined by the CIL Regulations. Understanding these triggers is paramount for developers, landowners, and local authorities alike, as they dictate when and whether a financial contribution is due. The general principle is that most new buildings and extensions that create additional gross internal area (GIA) are liable for CIL, with specific thresholds and exceptions.

3.1 Key Triggers for CIL Liability

1. Creation of New Dwellings: Any development that results in the creation of one or more new dwellings is liable for CIL, regardless of the size of the development (i.e., the 100 square metre threshold does not apply to new dwellings). This includes:

   • New Build Dwellings: Construction of entirely new residential units.
   • Conversions: The conversion of an existing building, or part of a building, into one or more dwellings, where that building was not previously used as a dwelling (e.g., converting an office to flats). If a building previously used as a dwelling is converted into multiple new dwellings (e.g., a large house into apartments), CIL may be triggered for the net increase in residential units and associated GIA. Conversions within a building that remains a single dwelling (e.g., splitting a house into two flats that remain under a single ownership and are treated as one dwelling for CIL purposes) may be exempt from the new dwelling trigger but could still be liable if the GIA increases by 100 square metres or more.
   • Residential Annexes and Extensions: While generally eligible for specific exemptions (discussed in Section 5), the creation of a residential annexe or extension that meets the definition of a ‘dwelling’ would technically trigger CIL if not for the available reliefs.

2. Increase in Gross Internal Area (GIA): Developments that increase the GIA of a building by 100 square metres or more are subject to CIL. This threshold applies to all development types except the creation of new dwellings. This trigger encompasses:

   • New Buildings: The construction of any new non-residential building exceeding 100 square metres GIA.
   • Extensions: Additions to existing buildings that increase the GIA by 100 square metres or more.
   • Changes of Use: Where a change of use results in the creation of new chargeable floor space. For example, converting a non-chargeable building (e.g., an agricultural barn) into a retail unit could trigger CIL if the new retail GIA exceeds 100 square metres. Similarly, if an existing building is repurposed such that its CIL rate changes (e.g., from a zero-rated use to a positive-rated use), CIL may be triggered based on the GIA of the ‘new’ chargeable use.
   • Demolition and Rebuild: If an existing building is demolished and replaced with a new building, CIL is calculated on the net additional GIA. However, for the existing GIA to be offset against the new GIA, the existing building must have been in ‘lawful use’ for a continuous period of at least six months within the twelve-month period ending on the day planning permission is granted [The Community Infrastructure Levy Regulations 2010, reg. 40(7)]. ‘Lawful use’ typically means that the building was occupied and operational for its intended purpose, as defined by planning permission or established use. The burden of proving lawful use rests with the developer.

3.2 Developments Exempt from CIL (not reliefs)

It is important to distinguish between developments that are excluded from CIL by definition and those that are liable but may qualify for a relief or exemption.

Developments that are generally not subject to CIL liability include:

• Development of Less Than 100 Square Metres GIA: Unless it involves the creation of a new dwelling, developments that create less than 100 square metres of net additional GIA are not liable. This is a critical threshold for many small extensions or minor changes of use.
• Buildings into which people do not normally go: Certain buildings, such as sub-stations, control rooms, or small ancillary structures, where people do not normally enter for carrying out a service, are generally not liable. This also applies to structures like pylons and wind turbines. However, garages associated with new dwellings are generally considered chargeable GIA unless they are genuinely external and used solely for parking.
• Temporary Buildings: Structures that are clearly temporary in nature and are not intended for permanent use may fall outside CIL liability.
• Development for National Security Purposes: As defined by the CIL Regulations, specific developments related to national security are excluded.
• Development where no planning permission is required: If a development proceeds without requiring planning permission, and also does not fall under permitted development requiring a ‘CIL liable’ notice, it will not trigger CIL. However, many forms of permitted development (e.g., larger home extensions, office-to-residential conversions under Class O) may still be CIL liable if they meet the GIA or new dwelling thresholds and require submission of a ‘CIL liable’ notice to the local authority.

3.3 Role of the Local Charging Schedule

While the CIL Regulations establish the overarching triggers, the specific rates and sometimes localised exemptions are determined by the local authority’s CIL Charging Schedule. This schedule is a legally binding document that sets out:

• CIL Rates: Rates are typically expressed in pounds per square metre (£/sqm) and can vary significantly based on:
  • Development Type: Different rates for residential, retail, office, industrial, and other uses.
  • Geographical Area: Differential rates may apply to different zones within the local authority area, reflecting varying land values, infrastructure needs, and development viability.
  • Scale of Development: In some cases, different rates may apply based on the number of dwellings or the total GIA.
• Effective Date: The date from which the CIL rates come into effect.
• Indexation Factors: The index to be used for annual adjustments.

It is therefore essential for developers to consult the specific CIL Charging Schedule of the relevant local authority early in the planning process. This provides clarity on potential liabilities and allows for accurate financial forecasting. The absence of an adopted CIL Charging Schedule means a local authority cannot charge CIL.

Many thanks to our sponsor Focus 360 Energy who helped us prepare this research report.

4. Calculating CIL Liability

The calculation of CIL liability is a systematic process that accounts for the scale of new development, the specific CIL rates set by the local authority, and an annual adjustment for inflation. While appearing complex, the process follows a defined formula to ensure consistency and transparency.

4.1 Key Steps in CIL Calculation

1. Determine the Gross Internal Area (GIA) of New Development (A):

   • Definition: GIA is measured in square metres and refers to the area of a building, or part of a building, defined by the inside perimeter of the external walls, including areas such as circulation space, service areas, and internal walls. It specifically excludes external areas (e.g., balconies, terraces), areas with a ceiling height of less than 1.5 metres (unless a dwelling), and certain structures not considered ‘buildings’ (e.g., open carports) [The Community Infrastructure Levy Regulations 2010, reg. 40(10)].
   • Measurement: This is typically derived from the approved planning drawings. Accuracy is crucial, as any errors can lead to recalculations and potential surcharges.

2. Identify the GIA of Existing Buildings to be Demolished or Retained (E):

   • Offsetting Existing GIA: Where a development involves the demolition of an existing building or the retention of parts of an existing building that are to be substantially altered, the GIA of these existing elements can be offset against the new GIA if they meet specific criteria. This prevents developers from paying CIL twice for the same ‘footprint’ of development.
   • ‘Lawful Use’ Test: For existing floor space to be deductible, the building must have been in ‘lawful use’ for a continuous period of at least six months within the twelve-month period ending on the day planning permission is granted [The Community Infrastructure Levy Regulations 2010, reg. 40(7)]. This is a critical provision designed to prevent developers from demolishing disused buildings to avoid CIL liability. Evidence of lawful use (e.g., utility bills, leases, council tax records, business rates) must be provided.
   • Substantially Altered or Demolished: The existing GIA must be from buildings that are to be demolished or retained buildings that will be ‘substantially altered.’ Substantial alteration implies significant structural changes such that the retained part no longer retains its original identity. If an existing building is retained without significant alteration but its use changes to a higher CIL rate, it may be treated as ‘new’ chargeable GIA without being able to offset its existing GIA if it did not meet the lawful use test or if the original use was non-chargeable.

3. Apply the Relevant CIL Rate (R):

   • Charging Schedule: The appropriate CIL rate (£/sqm) is taken directly from the local authority’s adopted CIL Charging Schedule. As noted, rates vary by development type (e.g., residential, retail, office) and often by geographical sub-zones within the authority’s area. It is vital to use the rate applicable at the time planning permission is granted.
   • Mix of Uses: For developments with a mix of uses (e.g., ground floor retail, upper-floor residential), the GIA for each use will be calculated separately and multiplied by its corresponding CIL rate.

4. Adjust for Indexation (Ip and Ic):

   • Purpose: CIL rates are subject to indexation to account for inflation in construction costs, ensuring that the value of the levy is maintained over time. This indexation is applied to both the new chargeable floor space and any existing floor space being deducted.
   • Index: The index used is the ‘BCIS All-in Tender Price Index’ (formerly the RICS CIL Index) [Department for Levelling Up, Housing and Communities, 2024c]. The index values are published annually by the Department for Levelling Up, Housing and Communities (DLUHC).
   • Application: The indexation formula uses the index figure for the year in which planning permission is granted (Ip) and the index figure for the year in which the charging schedule took effect (Ic). The formula ensures that the ‘value’ of the CIL rate is adjusted from the date the charging schedule was adopted to the date planning permission is granted. The index applied to the GIA of existing buildings (Ic) is slightly different as it aims to apply the original charging schedule value to the existing GIA, not the indexed rate for the new development.

4.2 The CIL Calculation Formula

The overarching formula for calculating CIL liability for a given development is:

CIL Liability = (R * A * Ip / Ic) - (R * E * Ip / Ic)

Where:
* R = The relevant CIL rate (£/sqm) for the particular use and zone, as set out in the charging schedule.
* A = The gross internal area (GIA) of the new chargeable development (in sqm).
* E = The gross internal area (GIA) of any existing buildings that are to be demolished or retained and substantially altered, and which meet the ‘lawful use’ test (in sqm). If E exceeds A, the value of E is capped at A, meaning CIL liability cannot be negative.
* Ip = The All-in Tender Price Index figure for the year in which planning permission is granted.
* Ic = The All-in Tender Price Index figure for the year in which the relevant CIL charging schedule took effect.

Example Scenario:
Let’s assume a developer proposes to replace an existing 200 sqm office building (which has been in lawful use for the past 12 months) with a new 500 sqm office building in an area with a CIL rate of £100 per sqm for offices. The charging schedule came into effect in 2018 (Ic = 250), and planning permission is granted in 2024 (Ip = 320).

1. R (Rate): £100/sqm
2. A (New GIA): 500 sqm
3. E (Existing GIA): 200 sqm (meets lawful use test)
4. Ip (Index at permission): 320 (hypothetical)
5. Ic (Index at schedule adoption): 250 (hypothetical)

CIL Liability = (£100 * 500 * 320 / 250) – (£100 * 200 * 320 / 250)
CIL Liability = (£100 * 500 * 1.28) – (£100 * 200 * 1.28)
CIL Liability = (£64,000) – (£25,600)
CIL Liability = £38,400

This example demonstrates how the net additional floor space, combined with the indexed CIL rate, determines the final liability. The indexation ensures that the real value of the contribution is maintained from when the rates were set to when the permission is granted.

4.3 Phased Developments and Appeals

For developments approved in phases, CIL liability is typically calculated for each phase based on the GIA created within that phase. This allows for CIL payments to be phased alongside construction. If a developer disagrees with the calculation of CIL liability, they have a right to appeal to the Valuation Office Agency (VOA) [Department for Levelling Up, Housing and Communities, 2024a]. There are strict timelines for such appeals.

Many thanks to our sponsor Focus 360 Energy who helped us prepare this research report.

5. Exemptions and Reliefs

While CIL is designed to be a broad-based charge on development, the regulations provide for specific exemptions and reliefs to address particular policy objectives, ensure fairness, and support certain types of development. It is crucial for developers to understand the distinction between an exemption (where CIL simply doesn’t apply to a certain category) and a relief (where CIL would apply but can be reduced or removed if specific conditions are met, often requiring an application).

5.1 Key Exemptions and Reliefs

1. Self-Build Exemption for Dwellings (Self-Build Homes, Residential Annexes, and Extensions):

   • Purpose: This exemption encourages individuals to build their own homes, recognising the personal investment and socio-economic benefits. It also supports the provision of additional living space for family members.
   • Self-Build Homes: Individuals building or commissioning a dwelling for their own occupation, as their main residence, can apply for this exemption. The dwelling must be primarily built by the individual, either alone or with help from others, and they must occupy it for at least three years after completion. The exemption applies to the entire dwelling [Department for Levelling Up, Housing and Communities, 2024d].
   • Residential Annexes: An annexe built within the curtilage of an existing dwelling (e.g., a garden annexe for a relative) can be exempt if it will form part of the main dwelling’s use and is built by a person who owns and occupies the main dwelling as their sole or main residence. The annexe must not be let out or sold separately from the main dwelling.
   • Residential Extensions: An extension to an existing dwelling is exempt if it is built by a person who owns and occupies the main dwelling as their sole or main residence. The extension must be for the purpose of extending the main dwelling and not create a separate dwelling.
   • Procedural Requirements: For all self-build exemptions, strict procedural requirements apply. A ‘Self-Build Exemption Claim Form’ (Form 7: Part 1 for homes, Form 8 for annexes/extensions) must be submitted and approved before commencement of the development. For self-build homes, a further ‘Self-Build Exemption Claim Form – Part 2’ must be submitted within six months of completion, providing evidence of occupation [Department for Levelling Up, Housing and Communities, 2024d]. Failure to follow these procedures precisely can lead to the loss of the exemption and full CIL liability.
   • Clawback: If the qualifying conditions (e.g., occupation for three years) are not met, the exemption can be revoked, and the full CIL amount will become payable, potentially with surcharges.

2. Social Housing Relief:

   • Purpose: This relief supports the provision of much-needed affordable housing, aligning with government policy to increase housing supply for those most in need. It ensures that the provision of social housing is not financially burdened by CIL, which could hinder its delivery.
   • Eligibility: Full relief is available for certain types of affordable housing that meet specific definitions within the CIL Regulations and relevant planning policy. This typically includes social rented housing, affordable rented housing, and intermediate housing [The Community Infrastructure Levy Regulations 2010, reg. 49-53]. The housing must be provided by a relevant housing association or other specified body.
   • Procedural Requirements: An application for social housing relief must be submitted before commencement of the development. The development must subsequently be used for social housing purposes.
   • Clawback: Similar to self-build, a clawback mechanism exists. If the use of the relieved development changes from social housing within seven years of commencement, the full CIL amount (plus indexation and potentially surcharges) becomes payable.

3. Charitable Relief:

   • Purpose: This relief acknowledges the public benefit delivered by charitable organisations and ensures that their activities are not unduly penalised by CIL.
   • Eligibility: Relief is available where a building (or part of a building) is to be used ‘wholly or mainly for charitable purposes’ by a charitable institution [The Community Infrastructure Levy Regulations 2010, reg. 54-57]. The charity must be registered with the Charity Commission.
   • Procedural Requirements: An application for charitable relief must be submitted before commencement of the development. The local authority will assess whether the proposed use qualifies.
   • Clawback: If the use of the relieved building changes from charitable purposes within seven years of commencement, CIL becomes payable.

4. Exceptional Circumstances Relief:

   • Purpose: This is a discretionary relief intended as a ‘last resort’ for developments that would demonstrably become economically unviable due to CIL liability, even after all other reliefs and exemptions have been considered. It aims to prevent CIL from unduly stifling otherwise beneficial development [The Community Infrastructure Levy Regulations 2010, reg. 57-58A].
   • Eligibility and Criteria: This relief is not an automatic right. The developer must demonstrate to the charging authority that:
     • Paying CIL would render the development unviable.
     • The development will provide ‘significant planning benefits’ that clearly outweigh the loss of CIL revenue (e.g., regeneration, job creation, or specific infrastructure provision not otherwise funded).
   • Process: An application must be made, accompanied by a robust and independently verifiable viability assessment. The charging authority will typically commission its own independent assessment to scrutinise the developer’s claims. If relief is granted, it is usually only for the amount necessary to make the development viable, not a full exemption.
   • Discretionary Nature: It is important to note that granting this relief is at the discretion of the charging authority, which must weigh the potential CIL revenue against the viability of the development and the planning benefits. It is complex, time-consuming, and rarely granted.

5.2 The Strictness of CIL Procedures

A recurring theme across all exemptions and reliefs is the strictness of the procedural requirements. The CIL Regulations are prescriptive, setting clear deadlines for the submission of forms and declarations. Failure to adhere to these procedures, even by a single day, can lead to the loss of the exemption or relief, resulting in full CIL liability and potentially additional surcharges. This strictness is intended to ensure administrative efficiency and prevent retrospective claims or abuses of the system. Developers are strongly advised to engage with the local authority early and seek professional advice to ensure all necessary forms are completed accurately and submitted within the stipulated timeframes.

Many thanks to our sponsor Focus 360 Energy who helped us prepare this research report.

6. Formal Payment Process

The formal payment process for CIL is meticulously regulated, involving a series of prescribed notices and deadlines designed to ensure efficient collection and to minimise administrative disputes. Adherence to these procedures is critical for developers to avoid surcharges and the potential loss of reliefs or exemptions. The process commences well before physical development begins and extends beyond the issuance of a demand notice.

6.1 Stages of the CIL Payment Process

1. Assumption of Liability (Form 1):

   • Requirement: Before commencing any CIL-liable development, the party or parties who intend to pay the levy must submit an ‘Assumption of Liability’ form (Form 1) to the local charging authority [Department for Levelling Up, Housing and Communities, 2024e]. This form identifies who will be legally responsible for the CIL payment.
   • Who can assume liability? This is typically the landowner, the developer, or another person interested in the land. Multiple parties can assume liability jointly.
   • Consequences of Failure: If no one assumes liability before commencement, the liability automatically defaults to the landowner(s) of the relevant land. Crucially, if liability is not assumed, the landowner will lose the right to pay by instalments and may also lose any reliefs or exemptions that would otherwise have been granted, resulting in the full CIL amount becoming immediately due and payable upon commencement of development, along with potential surcharges.
   • Transfer of Liability: Liability can be transferred between parties at any point prior to commencement of development, or even after commencement in certain circumstances, by submitting a ‘Transfer of Assumed Liability’ form (Form 3).

2. CIL Liable Development Notice (for Permitted Development):

   • Specific to Permitted Development (PD): For developments proceeding under Permitted Development rights (where full planning permission is not required but CIL is still applicable due to meeting thresholds, e.g., larger home extensions or certain office-to-residential conversions), a ‘Notice of Chargeable Development’ (Form 5) must be submitted to the charging authority before commencing the development. This acts as the trigger for CIL in PD scenarios, analogous to the grant of planning permission for other developments.

3. Liability Notice:

   • Issuance: Once planning permission is granted (or a ‘Notice of Chargeable Development’ is received for PD), and an Assumption of Liability form has been submitted, the charging authority issues a ‘CIL Liability Notice’ (Form 2). This notice formally sets out the CIL amount payable for the development, calculated using the formula described in Section 4. It will specify the chargeable amount, any applicable reliefs, and details of the relevant indexation.

4. Commencement Notice (Form 6):

   • Requirement: At least one day before the development is commenced, the liable party must submit a ‘Commencement Notice’ (Form 6) to the charging authority [Department for Levelling Up, Housing and Communities, 2024e]. This notice formally informs the authority of the actual start date of the development.
   • Definition of Commencement: ‘Commencement of development’ generally means the carrying out of any material operation (e.g., digging foundations, laying out means of access) pursuant to the planning permission. Demolition alone is often not considered ‘commencement’ for CIL purposes unless it is part of a wider operation. It is critical to precisely identify the commencement date.
   • Consequences of Failure: Failure to submit a Commencement Notice, or submitting it late, is a serious breach of CIL Regulations. It automatically results in the loss of any instalment payment arrangements and may lead to the revocation of any reliefs or exemptions previously granted. A significant surcharge (20% of the CIL liability or £2,500, whichever is lower) will also be levied [The Community Infrastructure Levy Regulations 2010, reg. 80].

5. Demand Notice:

   • Issuance: Upon receipt of a valid Commencement Notice, the charging authority issues a ‘Demand Notice’ (Form 7). This is the final invoice, specifying the exact CIL amount due, taking into account any reliefs, surcharges, and the specific payment due dates. It will also outline the applicable instalment schedule if one applies.

6. Payment:

   • Deadlines: CIL payments are typically due within 60 days of the commencement of development. However, many local authorities have adopted an ‘instalment policy’ within their CIL Charging Schedule, allowing larger CIL liabilities to be paid in staggered payments [Department for Levelling Up, Housing and Communities, 2024e]. For example, a common instalment policy might require 50% on commencement, and the remaining 50% six months later. The specific thresholds and timings for instalments vary between charging authorities.
   • Payment Mechanisms: Payments are usually made directly to the charging authority via bank transfer or other specified methods. The funds are then held in a dedicated CIL account.
   • Appeals: If a developer disputes the CIL liability, they can appeal to the Valuation Office Agency (VOA) [Department for Levelling Up, Housing and Communities, 2024a]. There are specific grounds and strict timelines for such appeals.

6.2 Penalties and Enforcement

The CIL Regulations include robust provisions for penalties and enforcement to ensure compliance and deter non-payment. These include:

• Surcharges: As mentioned, surcharges are applied for failing to assume liability (£50), failing to submit a commencement notice (20% or £2,500), or for late payment (a penalty of 5% of the unpaid amount after 30 days, 6 months, and 12 months, plus interest) [The Community Infrastructure Levy Regulations 2010, Part 9].
• Withdrawal of Exemptions/Reliefs: Procedural failures can lead to the automatic withdrawal of previously granted exemptions or reliefs.
• CIL Stop Notice: In serious cases of non-payment, a charging authority can issue a ‘CIL Stop Notice.’ This can halt development on site until the CIL liability (and any surcharges) is paid [The Community Infrastructure Levy Regulations 2010, reg. 110-117]. Failure to comply with a CIL Stop Notice is a criminal offence.
• Power to Sell Land: As a measure of last resort, if CIL remains unpaid, the charging authority has the power to take enforcement action, including placing a charge on the land and, ultimately, selling the land to recover the outstanding debt [The Community Infrastructure Levy Regulations 2010, reg. 118-124].

Given these significant potential consequences, meticulous attention to the CIL payment process and strict adherence to all deadlines and documentation requirements are absolutely essential for any party liable for the levy.

Many thanks to our sponsor Focus 360 Energy who helped us prepare this research report.

7. Financial Impact and Strategic Implications

The Community Infrastructure Levy is more than just a charge on development; it profoundly influences development viability, strategic planning, and the overall trajectory of infrastructure provision across the UK. Its financial impact varies significantly depending on the nature, scale, and location of development, while its strategic implications shape how local authorities plan for and deliver growth.

7.1 Impact on Development Viability

1. Capitalisation into Land Value: A core economic principle underlying CIL is that it should ultimately be capitalised into land values. This means that, in a competitive market, landowners are expected to absorb the cost of CIL by accepting a lower price for their land, reflecting the additional cost burden on the developer. In theory, this allows CIL to fund infrastructure without unduly affecting developer profits or house prices [PwC, 2017]. However, the extent to which this full capitalisation occurs in practice is debated and depends heavily on market conditions, developer margins, and the specific CIL rates relative to development value.

2. Developer Margins and Profitability: For developers, CIL represents a fixed cost that must be factored into their financial viability assessments. If CIL rates are set too high relative to market values and construction costs, it can erode developer margins, making projects unviable and potentially deterring investment. This is particularly acute in areas with lower land values or high construction costs, where the viability ‘buffer’ is thinner. Viability assessments conducted during the local plan process are crucial for setting CIL rates that are both ambitious in their infrastructure funding goals and realistic in terms of market capacity.

3. Market Sensitivity: The impact of CIL is not uniform across all market segments. High-value residential developments in economically buoyant areas may absorb CIL more readily than, for instance, a regeneration project in a challenging market or a speculative industrial development where margins are tighter. Similarly, certain non-residential uses, such as office or retail, can be more sensitive to CIL rates due to their specific yield requirements and market rents.

7.2 Differential Impacts on Development Scales and Types

1. Large-Scale Developments: For substantial, strategic projects, CIL can represent a significant financial outlay. However, these larger schemes typically undertake detailed viability assessments and have greater capacity to absorb such costs, often factoring CIL into their initial land acquisition bids. CIL for large-scale developments is often complemented by residual Section 106 agreements, which are still used for site-specific mitigation (e.g., direct highway improvements, provision of on-site affordable housing beyond policy requirements, or bespoke community facilities that are clearly related to the specific development) [Department for Levelling Up, Housing and Communities, 2024a]. The CIL Regulations specifically limit the ability to pool Section 106 contributions for infrastructure that can be funded by CIL (via the ‘Regulation 123 List’ of infrastructure that may be funded by CIL), to prevent double-dipping.

2. Small-Scale Developments: For smaller projects, particularly those just above the 100 square metre threshold or single new dwellings, CIL can constitute a proportionally higher cost burden. Small and medium-sized enterprises (SMEs) and self-builders may find CIL payments, alongside other planning fees and regulatory costs, challenging to manage, potentially affecting project feasibility or even deterring such developments. While self-build exemptions exist, their strict procedural requirements can be a hurdle for less experienced individuals.

3. Affordable Housing Projects: While social housing relief is available, the administrative complexity of applying for and securing this relief can add an administrative burden to affordable housing providers. Furthermore, the viability of mixed-tenure schemes must carefully balance the revenue from market housing (which pays CIL) against the costs of providing affordable housing (which is relieved). The interaction between CIL and affordable housing policy is a constant consideration for local authorities.

7.3 Strategic Implications for Infrastructure Delivery and Local Authorities

1. Infrastructure Funding Gap: CIL was never intended to fund all infrastructure needs. It is one tool in a broader infrastructure funding toolkit, alongside government grants, borrowing, private investment, and Section 106 agreements. Many local authorities acknowledge that CIL alone often does not fully bridge the ‘infrastructure funding gap’ – the difference between the cost of necessary infrastructure and available funding sources [Local Government Association, 2020]. This necessitates strategic prioritisation of projects and innovative funding approaches.

2. Infrastructure Planning and Prioritisation: Local authorities are required to produce an Infrastructure Funding Statement (IFS) annually, outlining CIL receipts, expenditure, and future infrastructure plans. They also develop ‘Regulation 123 Lists’ (named after the former regulation 123 of the CIL Regulations 2010), which identify the types of infrastructure that may be funded by CIL. This promotes strategic thinking about infrastructure needs and helps to prevent ‘double-dipping’ (where the same piece of infrastructure is funded by both CIL and Section 106 for the same development). However, the list is not exhaustive and local authorities still need to manage community expectations about what CIL can deliver.

3. Neighbourhood Share: The requirement to pass a proportion of CIL revenue (15% generally, 25% with an adopted Neighbourhood Plan) to parish or town councils provides a significant boost to local community projects. This ‘neighbourhood portion’ must be used to support the development of the area by funding the provision, improvement, replacement, operation, or maintenance of infrastructure. This mechanism empowers local communities to identify and fund their own priorities, fostering local engagement and ownership [Department for Levelling Up, Housing and Communities, 2024b].

4. Economic Stimulus and Discouragement: CIL can act as an economic stimulus by providing certainty of infrastructure provision, which in turn can unlock development. However, if CIL rates are perceived as excessively high or the administrative burden too great, it can discourage investment, particularly in marginal areas, leading to reduced development activity and slower growth. Striking the right balance is a constant challenge for charging authorities.

7.4 Critiques and Future Directions

Despite its advantages over the previous Section 106 regime, CIL has faced criticism. Some argue that its fixed tariff approach lacks the flexibility to respond to specific site circumstances or changing market conditions, while others contend that the lawful use test for existing buildings is overly complex. The administrative burden, particularly for claiming reliefs, remains a concern for smaller developers.

Looking ahead, the Levelling Up and Regeneration Act 2023 [Levelling Up and Regeneration Act 2023, c. 55] introduces a proposed ‘Infrastructure Levy’ (IL) that aims to replace CIL and Section 106. The IL is envisioned as a value-based charge, calculated as a proportion of the gross development value (GDV) upon completion, rather than a per-square-metre charge. This proposed shift aims to make contributions more sensitive to market value and to simplify the system further, including providing affordable housing ‘in-kind’ as part of the levy. While the precise details and implementation of the Infrastructure Levy are yet to be fully defined through secondary legislation and pilot schemes, it signifies a continued evolution in the UK’s approach to development finance and infrastructure funding, seeking to refine the lessons learned from CIL’s operation.

Many thanks to our sponsor Focus 360 Energy who helped us prepare this research report.

8. Conclusion

The Community Infrastructure Levy has undeniably carved out a critical role in the United Kingdom’s development finance architecture since its introduction. By establishing a more transparent, predictable, and broadly applicable charge on new development, CIL aimed to rectify the systemic challenges inherent in the preceding Section 106 system, primarily concerning the consistent and sufficient funding of essential infrastructure. It has successfully provided local authorities with a dedicated revenue stream, enabling them to strategically plan for and invest in the facilities and services necessitated by growth, from transport networks to educational provisions and vital community amenities.

However, CIL’s implementation is not without its complexities. Developers must navigate a highly procedural landscape, meticulously understanding the specific triggers for liability, the nuances of GIA calculation, the implications of indexation, and the stringent requirements for claiming exemptions and reliefs. Failure to adhere to these prescribed administrative steps, even minor infractions, can result in significant financial penalties, underscoring the imperative for early engagement with local authorities and professional advice.

The financial impact of CIL permeates various facets of the development process, most notably influencing land values, project viability, and developer margins. While theoretically designed to be absorbed into land prices, its practical effect varies with market conditions and development scale, posing particular challenges for smaller schemes and in economically marginal areas. Strategically, CIL has empowered local authorities to adopt a more proactive, plan-led approach to infrastructure delivery, fostering greater transparency through Infrastructure Funding Statements and devolving a meaningful proportion of funds to neighbourhood levels. Yet, it remains one component of a broader funding mosaic, frequently requiring supplementation from other sources to address the national infrastructure funding gap.

As the UK’s planning system continues to evolve, exemplified by the proposed Infrastructure Levy, the experience gained from CIL’s operation will undoubtedly inform future policy direction. The ongoing pursuit of a development finance mechanism that is simultaneously equitable, efficient, and robust in delivering sustainable growth underscores the dynamic and critical nature of this policy area. Ultimately, CIL’s legacy lies in its foundational contribution to establishing a more systematic framework for ensuring that the economic benefits of development are appropriately channelled back into the communities that support them, thereby fostering sustainable and resilient urban environments.

Many thanks to our sponsor Focus 360 Energy who helped us prepare this research report.

References

• Department for Levelling Up, Housing and Communities. (2024a). Community Infrastructure Levy Guidance. GOV.UK. https://www.gov.uk/guidance/community-infrastructure-levy
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