A proposed new land tax could prevent the construction of new buildings for charitable purposes, and sector bodies should be given an exemption, a group of charity infrastructure bodies has said.

A recent review proposed scrapping an existing tax on development land – the Community Infrastructure Levy – which charities are exempt from. The CIL allows local authorities to tax the increase in the value of land which comes with permission to develop it.

The review proposes replacing it with a new Local Infrastructure Tariff, which would also tax the development of land, although there are currently few details about how it would work. At present there is no proposal for charities to have an exemption.

During the development of the Community Infrastructure Levy, charities fought hard for an exemption, warning that it would derail many high-profile public benefit projects, most notably the £700m Crick Institute, Europe’s largest biomedical research centre.

Three bodies have responded to the new proposals by warning that charity exemptions to development tax must be preserved.

 A joint statement by the chairs of the Charities’ Property Association, the Churches’ Legislation Advisory Service and the Charity Tax Group, said: “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 Community Infrastructure Levy 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.”