Mayoral Community Infrastructure Levy and the zones

Mayoral Community Infrastructure Levy charging zones divide Greater London into three bands, and the band your site sits in changes the levy bill per square metre by a factor of three. The Mayoral levy is charged on top of the borough's own levy, not instead of it, so a London appraisal needs two rates, two charging schedules and one set of reliefs claimed in the right order at the right time.

That last point is where most money is lost. Reliefs and exemptions under the Community Infrastructure Levy Regulations 2010 have to be claimed before development starts, and a missed commencement notice can cost more than the relief was worth.

What the Mayoral levy funds

The Mayor's levy was introduced to contribute to the cost of Crossrail, now the Elizabeth line, and the second charging schedule continued that purpose. It is a strategic transport contribution rather than a fund for local infrastructure, which is why it sits alongside borough levies that pay for schools, open space and local highway works.

Boroughs collect the Mayoral levy on the Mayor's behalf, so the demand notice comes from the local authority even though the receipt is not theirs. That administrative detail matters in practice: the instalment policy applied to your Mayoral liability is the borough's, and instalment policies vary between boroughs.

How the charging zones are structured

The Mayoral schedule uses three zones, assembled from whole London boroughs rather than drawn around transport corridors. The highest rate applies across central and parts of west inner London, a middle rate covers much of inner and some outer London, and the lowest rate applies to a group of outer boroughs, mostly to the east.

Separately, higher rates apply to office, retail and hotel floorspace in central London and in the Isle of Dogs, which is the part of the schedule most often missed on a mixed use appraisal.

Those are base rates set in 2019 and they are indexed annually, so the figure that applies to your permission is the indexed one, not the base one. Charging authorities publish an annual rate summary, and the current indexed rate is the only one to put in an appraisal. Check the Mayoral schedule and the borough schedule on the day you fix the appraisal.

The relationship with borough levy charges

Both levies apply to the same chargeable development, measured the same way. So the total levy per square metre is the sum of the Mayoral indexed rate and the borough indexed rate for that use and that part of the borough.

Borough schedules are usually more granular than the Mayoral one. Many differentiate by zone within the borough and by use class, with residential rates varying across the authority and commercial rates set separately. A site on a borough boundary can therefore carry a materially different total charge from one a street away.

Where the levy burden affects what the scheme can deliver, it belongs in the Viability Assessment as a fixed cost rather than as a negotiable item, because the levy is not negotiable. That is the practical difference between the levy and a section 106 obligation, and it is why levy charges are usually treated as a cost input before affordable housing is tested.

Development charged and development relieved

The levy is charged on net additional gross internal floorspace in a chargeable development. Two aspects of that calculation do most of the work.

The first is the deduction for existing buildings. Floorspace in a building that has been in lawful use for at least six continuous months within the three years ending on the day planning permission first permits the development can be deducted from the chargeable amount. Evidence of that use is the applicant's responsibility, and the evidence standard is higher than people expect: business rates records, utility bills, leases and photographs rather than an assertion.

The second is the measurement convention. Gross internal area includes plant rooms, cores and internal circulation, which means a scheme with generous communal space pays levy on it. Basements count.

Mezzanines, conversions and changes of use each have their own treatment, and office to residential conversions under permitted development are a recurring source of confusion because the prior approval is still a permission for levy purposes in most cases. The route taken matters, and the interaction with Article 4 directions on office to residential conversion can change both the consenting route and the levy position.

Calculating liability and the indexation

The sequence is mechanical, and following it in order avoids surcharges:

1. The charging authority issues a liability notice after permission is granted.
2. Someone assumes liability in writing before commencement, using the prescribed form.
3. Any relief or exemption is claimed, and the claim must be determined before commencement.
4. A commencement notice is submitted before development starts.
5. The authority issues a demand notice setting out the amount and the instalment dates.
6. Payment follows the instalment policy, with interest and surcharges for late payment.

Indexation is applied using the published index for the year in which the permission first permits development, so a permission granted late in one year and implemented in the next is charged at the rate for the year of the permission rather than the year of commencement.

Miss step four and the consequences are disproportionate. Failure to submit a commencement notice before starting work can mean the loss of instalment rights, so the whole sum becomes payable at once, plus a surcharge.

Exemptions and relief claims

The reliefs that apply most often are social housing relief, charitable relief, the self-build exemption, the exemption for residential annexes and extensions, and the minor development exemption for schemes creating less than 100 m² of new floorspace where no new dwelling is created.

Each has to be claimed on the correct form, and each is lost if development starts before the claim is determined. There is no discretion to backdate. Self-build exemption carries a clawback period during which the dwelling must remain the applicant's principal residence, and a sale within that period triggers repayment.

Social housing relief is the one with the most interaction with scheme design, because the relieved floorspace is the affordable element and the tenure split therefore affects the levy bill as well as the planning balance. Set that out alongside the Affordable Housing Statement rather than treating the two as separate exercises.

This is general guidance, not legal advice. Check the position with the charging authority or a qualified professional before relying on it, and verify current rates against the published charging schedules.

Budgeting the levy at appraisal

Put the levy in the appraisal as a line item with four components: net additional gross internal area by use, the Mayoral indexed rate, the borough indexed rate, and the relieved floorspace. Then state the payment profile from the borough's instalment policy, because levy payable on commencement has a different cash flow effect from levy payable in instalments over two years.

An illustrative example

A mixed use scheme in an inner London borough creates 6,400 m² of residential and 900 m² of commercial gross internal area, replacing a 1,200 m² warehouse occupied continuously for the previous two years. The warehouse floorspace is deducted on production of rates records and a lease. Affordable housing of 1,900 m² is claimed under social housing relief before commencement. The appraisal applies the current indexed Mayoral rate for the borough's zone plus the borough's indexed residential and commercial rates to the remaining floorspace. This example is illustrative rather than a real appraisal.

Where an allocation applies, the levy sits alongside whatever the allocation expects on infrastructure, and understanding what an opportunity area allocation changes helps with the overall cost picture.

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