It’s always seemed strange to me that the payment in kind provision in the CIL regulations are so limited – that is CIL liability can only be discharged by a transfer to the charging authority of land or buildings not comprising part of the chargeable development for a value equivalent to the CIL payment due (or part of it), so long as that liability exceeds £50,000. 

When I have given some thought to this, it seems most likely that such land payments in kind will be limited to particular circumstances and not seen as a matter of course.  They will probably only be of interest to a charging authority which has plans for some form of community use requiring land or buildings – perhaps affordable housing, or a community hall or other recreation facilities, e.g. a play area.  It also depends on the developer/land owner holding suitable land or a building in the charging authority’s area.

So, strange because it doesn’t seem to be much of an opportunity to be taken up by either the payer or the recipient of CIL.  Strange also, that with CIL in so many respects being a replacement to section 106 payment obligations it is odd that there is a such a shift from accepted practice under current section 106 arrangements.  A missed opportunity?

The Government’s proposals to revise CIL regulations published last week look to introduce much more “user-friendly” payment in kind provisions.  The consultation recognises that there will be circumstances where “it is sensible for a developer to provide infrastructure either as well as land or instead of land”.  Implicitly, the commentary acknowledges the concern expressed by many that there is no guarantee on the timing of delivery of CIL funded infrastructure essential to many, usually residential developments e.g. the provision of a local school or other community facilities, by saying “the developer may be best placed to deliver [the] infrastructure in a timely and cost effective way”.

The Government’s proposals are to give charging authorities the choice to accept a combination of land payments and/or provision of infrastructure, provided they have published a policy to this effect on their website – particularly to ensure that there is clarity and transparency about what infrastructure the charging authority may be willing to consider as payment in kind. 

The exception will remain that only infrastructure that a developer is not separately required to provide under a section 106 or 278 (highways) agreement could be accepted as payment in kind, but we should remember that the extent of section 106 obligations will be limited with the introduction of CIL. Section 278 agreements are also under review in the consultation – about which a further blog will follow.

The proposals emphasise that it will remain in the charging authority’s discretion whether to accept payment in kind of infrastructure, and that this should only be accepted where the charging authority considers it will bring cost savings and/or timing or other benefits compared to the procurement of infrastructure through the use of CIL funds.

Once again, State aid raises its head – payments in kind by means of provision of infrastructure must be done in a way so as not to give rise to notifiable State aid.  To prevent procurement challenges delaying development, the proposals suggest that in-kind payments will be limited to the provision of services and works which fall below the capital value thresholds under the EU procurement rules.

I expect that these proposals will be welcomed by developers.