New planning tax will be optional for local authorities

Councils will be able to choose whether to use a controversial new planning tax from next year, the government has announced.

Local authorities will be able to choose whether to introduce the community infrastructure levy (CIL) for developments in their area and decide the level at which the charge should be set.

The department for communities and local government said the tax should only be used where there is a genuine need for infrastructure to support the development of the area. The charges could rise or fall in line with inflation or be revised as economic circumstances change, DCLG said.

There will also be model section 106 agreement, guidance on how the agreements can be used and a toolkit to help local authorities assess their affordable housing needs.

The British Property Federation, which represents property firms, warned that development would slow if the community infrastructure levy was set too high. It said the link between the levy and rises in land values “distorts the intended purpose” of the levy which is to raise funds for infrastructure. The BPF said more work was needed on the levy, including more information about the timescale in which the infrastructure paid for by the levy would be provided.

Michael Chambers, BPF director of regeneration and development, said: "We believe that CIL has the potential to offer speed and certainty to the process by which developers contribute to the infrastructure our towns and cities need – but it must be implemented in a sensible manner. We welcome the publication of this document but it is clear that a lot more work on CIL needs to be done. The skeleton of a CIL system is in place but we still have concerns about crucial areas of detail, such as how local authorities will assess the viability of a CIL charge and the extent to which CIL will really operate within the planning system. We will continue to work with the government on CIL as we need to create a system that meets the concerns of the development industry and also contributes to the much needed infrastructure."

Housing minister Caroline Flint said: "Almost all development creates some need for infrastructure and services so it is only right that development contributes a fair share alongside the billions of pounds of investment the Government is putting in. CIL will provide vital additional funding for the new infrastructure our communities need, helping them to grow in a sustainable way. Developers need as much certainty as possible given the current challenges they face from the international credit crunch, which is why I have been working closely with the industry and local government to ensure that CIL will deliver what is needed whilst giving more certainty and confidence compared to the current system."