The Department for Levelling Up, Housing and Communities (DLUHC) has consulted on plans to replace the existing system of Section 106 agreements and CIL with a new levy system of locally set rates, based on the GDV of a completed development, rather than on floorspace as is currently the case.

The rationale for the new levy is the Government’s stated objective in the context of levelling up: ‘ensuring local communities can take back control.’ Its ‘Right to Require’ aims to strengthen local government’s powers in the negotiation process, rather than contributions being determined through viability assessments. Specifically, it is intended to make developers pay a ‘fairer share’ towards affordable housing and local infrastructure including transport, health-care and education.

Under the proposals, the final contribution will be calculated on completion of a project rather than during the planning process, the intention being that the public sector benefits from increases in land value.

Discretionary, charged on floor area – replaced with mandatory levy, based on GDV on completion
Possibly the most significant of the changes is that, whereas CIL payments are based on a charge on floorspace by square metre, as set out in a council’s CIL charging schedule, the final payment for the IL will instead be based on the GDV of the completed development, based on a rate set by the council, but will apply only above minimum thresholds. Essentially, a land tax, with the intention of capturing land value uplift.

Under the new system, the application of the IL would be mandatory for all councils, as opposed to the current discretionary status of CIL – indeed, not all local authorities have adopted CIL charging schedules.