Understanding the Community Infrastructure Levy

The Community Infrastructure Levy (CIL) is a financial tool designed to ensure that new property developments in the UK financially contribute towards the improvement of local infrastructure. Introduced under the Planning Act 2008, the Community Infrastructure Levy requires developers to pay a charge based on the size and type of their projects. The funds generated support a broad range of local amenities, from transportation improvements to educational facilities, helping to accommodate the increased demand that new developments create.

Panattoni is the UK’s largest developer of industrial logistics warehousing space, generating huge contributions to the funding of local infrastructure. To find out more about how the Community Infrastructure Levy works, read on.

What is the Community Infrastructure Levy?

The Community Infrastructure Levy is calculated on a per square meter basis, with the rates set by local authorities. These rates can vary widely depending on the location and the type of development, reflecting the different infrastructure needs and market conditions across the country. Local authorities determine these rates through a process of public consultation and independent examination, ensuring that the levy is fair and that it does not inhibit development by making projects financially unviable.

One of the key advantages of the Community Infrastructure Levy system is its predictability. The previous system of Section 106 agreements often created lengthy negotiations, drawing out the development process. In contrast, Community Infrastructure Levy provides developers with clear, upfront costs. This transparency helps developers to plan and budget new schemes, allowing for more accurate financial forecasting and reducing the risk of unexpected expenses.

How does the Community Infrastructure Levy work in practice?

In practice, the Community Infrastructure Levy process involves several steps. First, local authorities set their Community Infrastructure Levy rates and publish a charging schedule. Developers are required to pay the levy on new buildings or extensions exceeding 100 square meters of gross internal floor space. The payment is triggered when planning permission is granted, but it is typically paid in instalments as the development progresses.

Local planning authorities are responsible for collecting the Community Infrastructure Levy payments. Once collected, the funds are allocated to infrastructure projects identified by the local council. These can include transportation improvements, educational facilities, parks, and community centres. The use of Community Infrastructure Levy funds is guided by a local infrastructure list, which outlines the projects that the council has prioritised for funding.

Developers must pay the Community Infrastructure Levy, and the timing of payments is usually linked to the commencement of development, although some councils may allow for phased payments depending on the size and scope of the project. Failure to pay Community Infrastructure Levy on time can result in financial penalties or even legal action, so it is critical for developers to understand their obligations under the Community Infrastructure Levy regulations.

What developments are subject to the Community Infrastructure Levy?

The Community Infrastructure Levy is charged on most new developments that involve the creation of additional floor space. This typically includes:

• Any new buildings or structures, particularly those that exceed 100 square meters, are subject to the Community Infrastructure Levy. This applies to both residential and commercial developments.
• Extensions to existing buildings that add more than 100 square meters of floor space are also subject to the Community Infrastructure Levy. This can include substantial residential additions or commercial expansions.
• Some changes of use that result in additional floor space or a higher rateable value for the property can trigger the Community Infrastructure Levy. This is common in scenarios where an industrial building is converted into a retail space or residential units.

Are any developments excluded from the Community Infrastructure Levy?

However, not all developments are subject to the Community Infrastructure Levy. The levy is not applied to:

• Developments under 100 square meters, such as small residential extensions or annexes, are typically exempt.
• Self-build housing projects often benefit from a Community Infrastructure Levy exemption, provided certain conditions are met, such as the owner residing in the property for a set period.
• Buildings constructed by registered charities for charitable purposes are exempt from the Community Infrastructure Levy, recognising their public benefit role.
• Affordable housing projects are often exempt from Community Infrastructure Levy or may qualify for a reduced rate, reflecting their contribution to addressing the housing crisis.

What are the implications for large warehouse developments?

Large warehouse developments, especially those within the logistics and distribution sectors, fall squarely under the purview of the Community Infrastructure Levy. Given the significant floor space these warehouses typically occupy, Community Infrastructure Levy payments can present a substantial boost to local funding.

These contributions can create a significant advance in local infrastructure.

For example, a large warehouse might facilitate upgrades to local roads, new public transport links, or enhancements to utility networks. The revenue generated through Community Infrastructure Levy ensures that these necessary infrastructure improvements can be funded, benefiting both the developer and the local community by creating a more sustainable and well-integrated environment.

From a strategic standpoint, developers of large warehouse projects incorporate the Community Infrastructure Levy into their financial planning from the outset. Understanding the local authority’s Community Infrastructure Levy rates and how they apply to the project can help developers manage costs and ensure that their projects remain viable while still contributing positively to the community.

Panattoni: funding infrastructure across the UK

As the UK’s largest developer of logistics warehousing, Panattoni understands that the success of a project is not solely determined by operational efficiency, but also by the positive impact it has on local communities. To that end, Panattoni integrates the Community Infrastructure Levy into its development strategies.

Panattoni’s approach to warehouse development is built on a commitment to sustainability and community integration. By embracing the Community Infrastructure Levy, Panattoni actively contributes to the improvement of local infrastructure. This dual focus on economic growth and community welfare is a hallmark of Panattoni’s leadership in the logistics sector.

For instance, in recent projects such as their industrial units in Rotherham, Panattoni’s Community Infrastructure Levy contributions have funded critical infrastructure upgrades, such as improved road networks and enhanced public services, which benefit both the new warehouse facilities and the surrounding communities. This forward-looking approach ensures that Panattoni’s developments are not only profitable but also sustainable and well-integrated into the local area.

Conclusion

The Community Infrastructure Levy is a vital mechanism for ensuring that new developments contribute to the broader infrastructure needs of local communities. For developers like Panattoni, understanding and integrating Community Infrastructure Levy into project planning is essential not just for regulatory compliance, but for achieving long-term success. By aligning their strategies with the Community Infrastructure Levy, Panattoni is helping to shape a future where industrial growth and community well-being go hand in hand, setting a new standard for responsible development in the UK.