Charity exemption from infrastructure levy could be abolished, experts fear

A review of the community infrastructure levy, from which charities are exempt, recommends replacing it with a new scheme that would grant 'no or very few exemptions'

Exemptions granted to charities to a levy on development could be abolished, experts fear.

A review of the community infrastructure levy, which is a tax on certain types of development in England and Wales to fund infrastructure expenditure and from which charities receive an exemption, recommends replacing the scheme with one that would grant "no (or very few) exemptions".

The review, which was commissioned by the government in 2015 and carried out by a body chaired by Liz Peace, formerly of the British Property Federation, proposes replacing the CIL with a local infrastructure tariff and possibly a new strategic infrastructure tariff.

The review group’s report, called A New Approach to Developer Contributions, says: "In an ideal world there would be absolutely no exemptions to the local infrastructure tariff on the grounds that every development contributes in some way to the need for infrastructure and that every development should therefore make a contribution to providing that infrastructure.

"We recognise, however, that there are reasons why the government may want to have certain exemptions, such as affordable housing and starter homes. It must be borne in mind, however, that the fewer funds that are raised from this tariff, then the more will have to be found from other sources to fund essential infrastructure."

The Charity Tax Group, the Charities’ Property Association and the Churches’ Legislation Advisory Service have today criticised the report, which they say overlooks the current exemptions for the charity sector in the CIL.

The chairs of the three organisations – Lord Cameron of Dillington of the CPA, the Rt Revd Alastair Redfern of the CLAS and John Hemming of the CTG – said in a joint statement: "While we welcome efforts to improve and simplify the current CIL rules, we are very disappointed that the review team has not made a firm commitment to introducing an equivalent charity exemption of any successor tax.

"Charities should not be penalised because the CIL has not generated the anticipated financial returns and the rationale for an exemption remains valid.

"Charities should not be taxed for development of land for charitable purposes (including social housing) or when leasing land to other charities, and the original CIL campaign group will be seeking urgent assurances from the government that a charity exemption will be included if a local infrastructure tariff is introduced."

The current levy is generally charged per square metre on a development’s increase in gross internal area, with local authorities able to set different CIL rates for different types of development.

Charities receive a mandatory relief if a development is to be used wholly or mainly for charitable purposes, as well as some discretionary reliefs.

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