In areas where a Community Infrastructure Levy (CIL) charging schedule has been adopted, the formula in the CIL Regulations must be used to calculate the CIL charge payable on a new property development. Indexation is part of the formula used to calculate the CIL charge and the wording in the regulations has been causing concern to some local authorities and developers.
The concerns arise due to the definition of the "index figure" for a given year, which according to the CIL regulations is: "the figure for 1st November for the preceding year in the national All-in Tender Price Index published from time to time by the Building Cost Information Service of the Royal Institute of Chartered Surveyors". Some local authorities are taking the start of the 'preceding year' to be 1 January, while others are taking it to be 1 November. This affects the indexation calculation for those permissions granted between 1 November and 31 December of a given year.
CIL charges are indexed by multiplying the calculated CIL liability by:
(1) the "index figure" for the year the permission was granted, divided by (2) the "index figure" for the year the charging schedule took effect.
Herbert Smith Freehills' view is that the 'preceding year' is the previous full calendar year. So, for example, if planning permission is granted on 1 December 2015 then the 'index figure' to use in relation to the planning permission would be the All-in Tender Price Index published on 1 November 2014.
And by way of reminder, all CIL payments are indexed from the date that the relevant charging schedule took effect. For Mayoral CIL, this was 1 April 2012. Indexation is by reference to the All-in Tender Price Index. The amount of indexation is likely to be a material sum when calculated across the whole of a development project, so remember to factor this in to your development appraisals.
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