The CIL Regulations 2010 came into effect on 6 April 2010. We set out the bare legal bones of how CIL is set, who is liable for it and when it becomes due, with some comments on the changes to the section106 system.

What is CIL?

The Planning Act 2008, which introduces CIL, tells us that it is a levy whose overall purpose is to ensure that the costs incurred in providing infrastructure to support development can be funded wholly or partly by owners or developers of land. The details for how and when CIL is charged are set out in the CIL Regulations.

It is important to remember that CIL is discretionary and it is up to a local authority to make a decision to charge CIL. If they decide not to do so, then a local authority may continue to seek the provision of such infrastructure through traditional planning agreements. Although the opportunities for doing so are restricted by the CIL Regulations and will be further reduced from April 2014. Once an authority has started to charge CIL, a developer cannot ‘opt out’ of paying it. It is payable in relation to net new builds over 100 sq m (except for buildings such as substations and wind turbines, in which people do not normally go). There are exemptions and reliefs available in some cases.

Setting the rate

A charging schedule must be drawn up for consultation before a local authority can charge CIL. Consultees are specified in the regulations and include neighbouring authorities, local residents and businesses, voluntary bodies and local business organisations. A number of authorities have now started work on preparing their schedules. The charging schedule will be subject to examination before it is accepted.

In setting CIL, the costs of infrastructure and the effect on viability of development in the authority’s area are major factors. A good evidence base will be necessary. There can be more than one rate for CIL; different rates can be set for different areas or different uses of development. Guidance says that differential rates are only permitted on the grounds of economic viability.  

Who pays and when

CIL will only become payable once a local authority’s charging schedule is in place and once “chargeable development” is commenced. There are different payment periods and provisions for phased developments.

Primarily, it is the landowners of the land within the red line of the planning permission, or relevant phase, who are liable. However, it is possible for a person to assume liability for CIL by submitting an “assumption of liability notice” to the collecting authority. This would normally be a developer; landowners will often want to impose this obligation to assume liability in their contractual documentation with developers.

Liability for CIL may be withdrawn or transferred in certain cases before commencement of the relevant development. The person assuming liability becomes liable when development commences in reliance on the planning permission. It is possible for multiple parties to assume the liability for CIL, in this case, they will be jointly and severally liable for CIL.

If nobody assumes liability, then the default position is for the liability to fall on the landowners. Liability is apportioned by reference to value of the landowner’s interest. The landowners’ liability exists regardless of whether they agreed to the planning application being made. In some cases, a landowner who becomes liable in default can seek to have a demand notice suspended, assuming the development has not yet commenced on his land.

There are a number of exemptions from the liability to pay CIL, some of which are applied at the discretion of the charging authority. Principally, the exemptions relate to charities and social housing. They are too complex to address in this guide, but it should be noted that exemptions are lost if development is commenced before the claim is determined by the authority and claims for exemptions must follow a set procedure.

It is possible to request a review of the calculation of the chargeable amount and there is a set procedure to follow to instigate such a review.

Transitional arrangements

As the CIL Regulations have been in force since 6 April 2010 there is some transitional protection incorporated within them. Liability to CIL does not arise for development if on the day the planning permission is granted for that development, there is no charging schedule in effect in that area.

In addition, there is some protection for applications made under section 73 Town and Country Planning Act 1990. Where such applications result in the extension of time within which development can be commenced, you only need to look at the development permitted under the original permission for CIL purposes. If that was granted before the relevant authority “adopts” CIL, no CIL will be payable.

However, current government advice is not to extend time pursuant to section 73 applications, so a resulting new planning permission may well be subject to CIL. Care must be taken in current section 106 drafting to manage this potential “double liability”.  

Spending CIL receipts

CIL must be applied to funding infrastructure, although this is likely to be widened pursuant to the Localism Bill to include ”funding the provision, improvement, replacement, operation or maintenance of infrastructure”. It can also be used to reimburse expenditure already occurred. Each year there must be a report of CIL receipts and spending, showing what it has been spent on. There is no obligation for the authority to provide a list of what infrastructure it will provide with the CIL receipts or a timescale for delivery of that infrastructure. This uncertainty over delivery has already led to much concern on the part of developers and landowners.

It is helpful to look at what is meant by “infrastructure” as CIL is set and collected for infrastructure. The word has its normal meaning and the definition in the legislation merely adds it includes things such as roads, medical facilities and educational facilities. CIL does not currently cover the provision of affordable housing but this may change.

Enforcement provisions

If the person or parties who have assumed liability for CIL (or the relevant landowner in default) fails to pay CIL, collecting authorities have a range of sanctions available to them to recover CIL debts and to remedy breaches of the CIL regulations. These include imposing surcharges or interest penalties and extend as far as the service of a CIL stop notice (which can require a development to stop until CIL is paid or the stop notice is withdrawn), or applying for a court order to recover CIL debts. Failure to comply with a CIL stop notice or a court order seeking recovery of a CIL debt is a criminal offence.

CIL and section 106 agreements

This is not the end of section 106 agreements. Local authorities are not obliged to levy CIL and therefore, section 106 agreements will still be in use in non-adopting authorities. They are also still available where CIL is adopted. In each case however, the CIL Regulations restrict the circumstances in which section 106 agreements may influence planning decisions.

Some changes have been made to planning obligations via the CIL Regulations. These must now be necessary to make the development acceptable in planning terms; directly related to the development; and fairly and reasonably related in scale and kind to the development. If these three criteria are not met, the permission will be vulnerable to successful judicial review. Further restrictions on taking section 106 agreements into account when granting planning consent also apply.