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Capital growth put at risk by new development tax

The British Property Federation has warned London’s boroughs to take care when charging the Community Infrastructure Levy or risk choking off development in the capital.

Giving evidence to the Greater London Authority at City Hall today, BPF chief executive Liz Peace said that some authorities saw the levy as an opportunity to tax new schemes “until the pips squeak”, rather than its intended aim of funding essential infrastructure.

Peace added that problems with the drafting of CIL regulations meant that developers faced having to pay for some infrastructure twice – once via section 106 agreements, the current regime, and again through CIL – so called ‘double dipping’.

New development in London will be hit twice by CIL, due to London Mayor Boris Johnson also charging the levy to help meet a £300m shortfall in the funding of Crossrail.

Liz Peace, chief executive of the British Property Federation, said: "There's no doubt if you set a high CIL you will scupper development.

"There's a fear CIL is being imposed on top of s106 agreements, rather than s106 being scaled back and CIL used to fund infrastructure in its place. This 'double dipping' needs to resolved.

"Given the climate we're in, it doesn't take much to discourage development. CIL shouldn't be about taxing developers until the pips squeak, but asking them to pay what's reasonable to fund infrastructure vital to development."

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