What is the Community Infrastructure Levy?
The Community Infrastructure Levy (CIL) is a planning charge that local authorities in England and Wales can adopt to help fund infrastructure needed to support development in their area. Introduced under the Planning Act 2008 and amended by subsequent regulations, CIL is calculated as a per-square-metre charge on the net additional floorspace created by qualifying developments.
CIL replaced the previous system of pooled section 106 contributions for strategic infrastructure, providing a more transparent and predictable mechanism for infrastructure funding. Unlike section 106 agreements, CIL rates are fixed by the local authority's adopted charging schedule and cannot be negotiated on a site-by-site basis.
For property developers, CIL represents a significant cost that must be accurately reflected in development appraisals and finance applications. In some London boroughs, CIL charges (combining borough CIL and Mayor of London CIL) can exceed GBP 200 per square metre, adding hundreds of thousands of pounds to a medium-sized residential scheme.
How CIL is calculated
CIL is charged per square metre of net additional gross internal area (GIA) created by the development. The net additional area is the total new floorspace minus any existing floorspace that has been in lawful use for at least six continuous months within the three years preceding the planning application.
The charge per square metre varies by local authority, by use class (residential, retail, commercial), and sometimes by geographic zone within the authority's area. Rates are set through the authority's charging schedule, which is adopted after public examination and must be supported by evidence of infrastructure needs and viability.
CIL rates are index-linked, currently to the BCIS All-in Tender Price Index, and are updated annually. Developers should use the current indexed rate (not the adopted rate) in their calculations. The indexed rate for any given year is published by the relevant authority, typically in January.
The calculation formula is: CIL charge = Net additional floorspace (sq m) x CIL rate (GBP per sq m) x BCIS index adjustment. For example, a development creating 1,000 sq m of net additional residential floorspace in an area with a CIL rate of GBP 150 per sq m would generate a CIL charge of GBP 150,000 (before indexation adjustment).
Exemptions and reliefs
Social housing relief is a mandatory exemption that applies to affordable housing provided through a registered provider or as part of a planning obligation. Qualifying social housing is exempt from CIL, which can significantly reduce the total charge on mixed-tenure schemes. The relief must be claimed before development commences.
Self-build exemption applies where the development is a dwelling built by the owner for their own occupation. The exemption must be claimed before commencement, and the owner must occupy the dwelling as their principal residence for at least three years after completion. If these conditions are not met, the exemption can be clawed back.
Charitable relief is available where the development is to be used by a charity for charitable purposes. This is a discretionary relief — local authorities can choose whether to offer it. The relief can be clawed back if the charitable use ceases within seven years.
Exceptional circumstances relief is available in very limited circumstances where the CIL charge would make the development economically unviable. This relief is discretionary, rarely granted, and requires the developer to demonstrate that the scheme cannot viably pay CIL — a high bar, particularly in areas where the charging schedule has recently been adopted based on viability evidence.
CIL and development finance
Development finance lenders expect CIL costs to be clearly identified in the project budget and development appraisal. Failure to account for CIL is a red flag that suggests the developer has not properly assessed the scheme's costs, and may result in the finance application being declined or the facility being inadequately sized.
The timing of CIL payments affects cash flow modelling. CIL becomes payable upon commencement of development, and local authorities vary in their instalment policies. Some require full payment within 60 days of commencement; others allow payment in instalments over 12-24 months. Developers should check the specific instalment policy and reflect it in their cash flow projections.
Some development finance lenders will include CIL within the facility, treating it as a development cost to be drawn down alongside construction costs. Others expect the borrower to fund CIL from equity. This should be clarified during the application process, as it affects the equity requirement and drawdown schedule.
CIL across different local authorities
CIL rates vary enormously across England and Wales. Inner London boroughs typically charge the highest rates — Westminster, for example, charges over GBP 400 per square metre for residential development in some zones. Outer London boroughs and Home Counties authorities typically charge GBP 100 to GBP 250 per square metre.
Regional cities and towns generally have lower CIL rates, typically GBP 30 to GBP 150 per square metre, reflecting lower development values and the need to maintain viability. Some areas in the North, Midlands, and Wales have CIL rates below GBP 50 per square metre, or have not adopted CIL at all.
The Mayor of London's CIL (MCIL) is an additional charge that applies to all development in London, on top of the borough's own CIL. The current MCIL rate for residential development varies by zone, from GBP 25 to GBP 80 per square metre. London developers must therefore account for two separate CIL charges in their appraisals.
Practical steps for managing CIL
Developers should identify the applicable CIL rate at the earliest stage of site assessment and include it in their initial feasibility appraisal. The local authority's CIL charging schedule is publicly available and should be checked for the specific use class and geographic zone applicable to the site.
Maximising the credit for existing floorspace can significantly reduce the CIL charge. If the site contains existing buildings that have been in lawful use within the relevant period, the floorspace of those buildings is deducted from the gross new floorspace. Evidence of lawful use (business rates records, utility bills, tenancy agreements) should be gathered and preserved.
All applicable reliefs and exemptions should be claimed before development commences — late claims are generally not accepted. For mixed-tenure schemes, claiming social housing relief for the affordable housing element can substantially reduce the total CIL liability. Professional advice on CIL strategy is recommended for schemes where the charge is significant.