With the publication of the consultation on CIL on 30 July, we had our first glimpse of how the Government plans CIL to work. The provisions for charity investment property have some issues and there are no express transitional provisions exempting permissions granted before the regulations take effect, which the Government intends to be on 6 April 2010. Government is strongly encouraging authorities to adopt CIL. Responses to the consultation must be submitted by 23 October.  

CIL is to be paid by the person who serves an assumption of liability notice. If no such notice is served, the landowners will be liable, which includes lessees with more than seven years to run on the day on which the planning permission first permits development. That concept is important for that and other reasons. It is not always the date of the planning permission. In fact it is more likely to be a later date, relating to when reserved matters or conditions precedent to development are met, with special provisions for phased developments. If no-one assumes liability before commencement, surcharges will be payable by each landowner.  

So landowners especially will need to consider this when disposing of land for development. It is an example of why it is worth considering CIL now. Landowners will be liable in any event if the person assuming liability defaults.  

Readers will know that a planning application can be made over another person’s land, whether or not they consent. This is often the case in major developments covering large areas. A serious issue with the proposals is that CIL liability can fall on landowners even if they do not consent to the planning application.  

There are exemptions for charities on land they own and use wholly or mainly for their charitable purposes. But there are circumstances in which such exemptions do not apply, such as joint ownership with someone not entitled to the exemption and use by someone other than the charity. Charities can also be given discretionary relief on investment land. Again these exemptions do not always apply. And importantly, if development is commenced before the collecting authority has decided the claim, the claim lapses. This may be a serious issue for example where the charitable institution does not have control over the whole site or the timing of commencement. There are other conditions to claims some of which must continue to be fulfilled after the claim is allowed. There may also be an issue over whether one needs to be an “institution” to be a charity for the purposes of CIL.

The draft regulations specify how charging schedules are to be drawn up and the rights to object to them. They must be publicised, with relevant evidence. There must be an examination of the schedule by a examiner, probably drawn from the Planning Inspectorate. Whilst there is a right to be heard if certain conditions are met, the draft does not say if this will be by inquiry, hearing or written representations. The consultation paper suggests informal hearing. This might be thought inappropriate for a taxation measure. The time limits are short and strict.  

There are provisions for appeals against calculation of the charge and disallowance of reliefs. But again the time limits are strict and short. There are various mandatory notifications to be made, including commencement of development. Failure to serve such notices can lead to surcharges and criminal liability. Most surcharges have a fixed maximum even where calculated as a percentage of CIL, But the late payment surcharge maximum is the greater of £200 and 5 per cent of the unpaid CIL. Payment of CIL will be enforced by criminal sanctions unlike payments under section 106 which are civil debts.  

The accompanying consultation makes it clear there is a very wide range of things which can be included in CIL yet local authorities will not be required to specify the infrastructure for which they propose to charge CIL. This is good for local authorities who can also pass the funds to other bodies. But as there is little ability to ensure that CIL is spent on particular infrastructure landowners and developers may have a concern about this. CIL does not look much like a hypothecated tax any more.  

A couple of other points of note are that CIL will be set at a rate per square metre, rather than “per roof” and there can be different rates for residential and other development. Counties are not to be charging authorities. But it is said that districts can include road upgrades for heavier waste and minerals vehicles in CIL.  

There is quite a lot in the consultations and draft regulations. We can only scratch the surface here. We would urge our readers to get hold of the regulations and consider now if they wish to address them in land sales and section 106 agreements they enter into now or which are currently under negotiation. They may also wish to make representations to the Government.