"our clients will thank you all the more if you are well-informed about the CIL and talk them through what contingency they may need, if indeed any."
The Community Infrastructure Levy (CIL) was introduced back in 2010 by the government to help local authorities in England and Wales raise finance from developers for infrastructure needs, such as roads, schools and GP surgeries.
While it is fairly well known that major developers must contribute to the infrastructure of an area in which they undertake a new project, it is not always understood that individual self builders may face a similar levy.
Therefore, brokers must discuss this with their self build clients to ensure that they are aware of possible charges and to confirm that contingency has been built into their budget. Some lenders will ask if CIL has been accounted for, as no one wants an unexpected bill after all of that hard work!
CIL explained
The charge only applies in areas where a local authority has consulted on, and approved, a charging schedule. When applicable, these levy rates can be found on each authority’s website. Not all local authorities make this charge and some exemptions exist for specific property types.
Where a local authority does enforce the CIL, it applies to anyone building their own home or anyone who has commissioned their own home. This is irrespective of who is doing the actual bricklaying!
To give an example from our home county, East Suffolk Council charges a levy for new developments. The cost is £300 per square metre for developments in prime locations and reduces for other areas.
As a typical three-bedroomed house has a floor area of around 100m2, this could add £30k to the cost of a modest self build property in the popular coastal towns of Aldeburgh or Walberswick. The larger the property, the greater the levy so a grand seven-bedroom property with a floor area of 317m2 would need to pay £95,100. As we’re not talking small numbers here, it may be that with this knowledge, a self build client might adjust their plans to reduce the impact of these charges.
We’ve used these examples from Suffolk as it’s where we are based but the levy is payable in many local authorities and councils across England and Wales. The levy charged varies greatly with some London boroughs charging up to £750 per square metre. With many authorities struggling to make ends meet, it may be that more of those who do not currently charge, start doing so to raise much-needed funds.
Self build exemptions
It is possible for self builders to receive an exemption from these charges if four specific steps are followed within a set timeframe. Crucially, the exemption must be applied for before any work begins. In addition, the self builder must live in the property as their main residence for at least three years after the work is completed.
Detailed information about the four steps can be found on at https://www.gov.uk/guidance/community-infrastructure-levy#para082. This explains which forms must be completed, submitted and returned and in what order. See Paragraph: 082 Reference ID: 25-082-20190901.
It’s also important to point out to clients that a self build exemption can also be withdrawn in certain specific circumstances. This could be in relation to the property itself, failure to submit final evidence on completion of the building, or if the property is let or sold within a three-year time frame. If such events occur, the owner is not only charged the levy but a surcharge of 20% (or £2,500, whichever is the lesser) is added to the bill.
Purchasing land for a self build project
Many self builders purchase land that already has planning permission granted, as it is one less hurdle to overcome in what can be a complex process. In these circumstances, the buyer and seller (or their solicitors) must agree upon who is responsible for the CIL. Buyers and brokers should also be aware that a levy is payable if any building or groundworks has commenced, even if it wasn’t under their watch.
In short:
● The levy is payable on all new developments - self build properties included.
● Self builders can receive an exemption if they apply before they start work and stay in their property for three years after the build is complete.
● The paperwork to receive the exemption is complex and timing is important.
● Self builders buying land with planning permission already agreed need to determine whether the buyer or seller will be responsible for the CIL.
● Brokers can save their clients thousands of pounds by ensuring that their clients are well-informed about the levy, well in advance of putting a shovel in the ground.
As any broker who has supported a client with a self build project will know, you tend to be particularly invested in the progress of the build and completion. Your clients will thank you all the more if you are well-informed about the CIL and talk them through what contingency they may need, if indeed any.
Forewarned is definitely forearmed when it comes to the CIL.
