CIL: the more it changes, the more it stays the same?

Read Roy Pinnock’s overview of the latest changes to the Community Infrastructure Levy regime (and what is still needed).

This article was first published in Estates Gazette on 9 June 2019.

Self-build series Part 4: Further reform still needed

This Series has explored the common CIL risks for self-builders and the proposed amendments that should help to protect future self-builders from themselves. These changes are summarised in Part 3 of this series. 

Whilst the changes have addressed most of the potential future pitfalls with the self build exemption, they do not address or undo any previous injustice that has resulted in many self-builders incurring unexpected CIL in the tens of thousands. 

We do not accept the Government’s explanation that retrospective amendments to the Planning Act 2008 are not possible, we will continue to lobby for retrospective amendments to rectify the unfairness that has experienced by so many self-builders to date, as well as further amendments to:

  1. introduce an appeals process against the refusal of SBE application and other reliefs;
  2. the wording in regulation 54(C)(3) and/or the Self Build Part 2 Form (form 7) to make clear that the information or evidence that is to be submitted to verify the use of the home by the self builder is not limited to the three things listed on the form. Other types of evidence could satisfy the requirement and the requirement to ‘include the particulars specified or referred to in the form’ does not provide the Collecting Authority with a discretion to accept evidence beyond the three things listed on the form[1].

Watch this [blog]space.


[1] We are aware of a situation where a home was purpose built for a disabled child and due to the build being funded by the child’s trustees it was not possible for one of three supporting documents required under the Self Build Part 2 Form (form 7) to be supplied and this resulted in the SBE being withdrawn

Self-build series Part 3: Self-build pitfalls fixed, but will not remedy existing injustices

The earlier blogs in this Series have explored the pitfalls in the CIL regulations in connection with the self-build exemption (SBE). 

After much lobbying the Government appears finally to have listened.  The Government’s response on the Developer Contributions consultation confirms that the proposed amendments to the CIL regulations (that were announced as part of the Government’s Developer Contributions reform consultation) will be taken forward to make the SBE process a little easier, fairer and more forgiving. 

The draft regulations (laid before the House of Commons to come into force on 1 September 2019) ensure the penalties that result from a self-builder failing to submit a commencement notice before starting development will be softened. Instead of losing the SBE entirely, the developer will only be required to pay a mandatory surcharge equal to the lesser of £2,500 or 20% of the CIL that would apply to the development if not for the exemption (i.e. the penalty is capped at £2,500)[1], and confirm that the SBE to be carried over to an amended permission (i.e. a s73 permission), even if the development has commenced under the original permission[2].

This will not apply to wholly new applications, so careful thought still needs to be given to the potential CIL consequences if a new application is made after works have commenced under the original permission.

In addition to the changes for self-builders, the proposed amendments will also help to correct many of the pitfalls that plague the other CIL exemptions including:

  • the failure to give the commencement notice before starting development will no longer (from 1 September 2019 assuming the amendment regulations take effect) result in the loss of charitable relief or social housing relief exemption; and
  • the failure to give the commencement notice before starting development will no longer result in the loss of the exemption for residential annexes and residential extensions (from 1 September 2019 assuming the amendment regulations take effect).

However, as for the self-build exemption, the failure to give the commencement notice in advance of starting development will for each of the abovementioned scenarios give rise to a mandatory surcharge of no more than £2,500 (although the draft amendment regulations do not explicitly refer to residential extensions being subject to this penalty).

Unfortunately, the proposed amendments are not to have retrospective effect, so will not address or undo any previous injustices.  Part 4 of this Series will address this and what more is needed.


[1] Regulation 6 of the Community Infrastructure Levy (Amendment) (England) (No. 2) Regulations 2019

[2] Regulation 7 of Community Infrastructure Levy (Amendment) (England) (No. 2) Regulations 2019 proposes a new regulation 58ZA


Self-build series Part 2: Options for retrofitting the exemption to future permissions

Following on from Part 1 of the Self-Build series, the precarious position for future self-builders should be improved later this year, given the Government’s response to their Developer Contributions consultation.  However, the proposed amendments will only come into effect from 1 September 2019, arriving too late to fix the predicament of many existing self-builders.

Therefore, if works have started but deviated from what was originally approved and a s73 application or new application is made (instead of a s96a application) but not determined, to try to avoid a CIL liability under the new permission the self-build should consider and discuss one or more of the following options with the LPA:

Option 1 – Agree to extend the determination date for the s73 application until after 1 September 2019 when the proposed amendments have taken effect to allow a transfer of the self-build exemption. 

Option 2 – Agree that commencement under the original permission does not disqualify the new permission from the self-build exemption.

It is not uncommon for LPAs to claim that commencement under the original permission constitutes commencement for the purposes of the new permission and that this disqualifies the new permission from the self-build exemption.  Whether or not the LPAs position is legally correct depends on how far advanced the works are under the original permission, as there will need to be a material operation that could be undertaken as part of the new permission to implement it. If the LPA can be convinced that that works have not commenced for the purposes of the new permission and that they are still capable of granting the self-build exemption for it, the self-builder ought to (as soon as possible and before the new application is determined):

  1. submit an application for the self-build exemption;
  2. cease development under the original permission in advance of the new permission being granted, and not recommence development under the new permission until:
    • the self build exemption has been granted; and
    • a completed assumption of liability notice and commencement notice is submitted to the LPA for the new permission (noting a future commencement date);
  3. document their development activities as clearly as possible (i.e. document/photograph when and where the works stopped on site, what works were the material operation under the new permission, obtain written statements from contractors, etc.) so this evidence can be provided to a LPA, if needed to corroborate their position. 

Option 3 – If the LPA will not agree that commencement under the original permission does not disqualify the new permission from the self-build exemption

  1. write to the LPA to ask that the s73 application be determined as a s73A application, with the self-build exemption to be granted on the same day as the permission. If this is not agreed by the LPA or the application is not a s73 application, the application should be withdrawn and a new application submitted as a s73A application;
  2. submit an application for the self-build exemption in advance of the application being granted permission; and
  3. submit with the self-build exemption application a completed assumption of liability notice and commencement notice which states that the date of commencement is the date of the grant of the new permission and the self-build exemption.

All of the options carry large risk and require the cooperation/‘blessing’ of the LPA. Option 1 is the preferred approach as it carries the least risk and should be the easiest to secure LPA agreement to.

If a self-builder has made a new application and is unable to agree one of the above approaches with a LPA, quickly, it should consider withdrawing its application before it is granted and the potential CIL liability is crystallised. 

Given the Government’s response to the Developer Contributions consultation, it is unlikely that a LPA would seek to take enforcement action where a self-builder withdrew or delayed the making of their s73 application, on the understanding that the self-builder would submit a s73 application as soon as the proposed amendments to the CIL regulations take effect. 

The proposed changes to the CIL regulations do not relate to s73A applications. Therefore, it is critical that the LPA is comfortable that a s73 and not a s73A application can be used to correct works deviating on site from what was originally approved. This will be more of an issue for those s73 applications that are made late in the development process and there is very little work remaining. 

Part 3 and 4 of this Series will address the Government’s response to reforming developer contributions and the changes that will be made to the CIL regulations to help make the self-build exemption process a little easier, fairer and more forgiving in the future. 

Until at least 1 September 2019, self-builders need to remain alert to the risks outlined in Parts 1 and 2 of this Self-Build series.

Self Build series Part 1

We regularly get CIL self-build enquiries following our blog. Sadly, more often than not the request for advice comes after works have commenced (often without a commencement notice having been given) or a subsequent application has been made at the behest of local authorities (LPAs). 

Here are some common risks with the self-build exemption:

1. A self-build exemption does not, at present, transfer to a related application (i.e. a s73 application or a new application for substantially the same development). This means that:

a. a new application for the self-build exemption needs to also be made for the subsequent application. If works have not commenced under the original application then this is a straight-forward repeat of the same process for the original application (if not see 2 below);

b. the self-build exemption must be obtained and a commencement notice submitted in connection with the new permission before starting any work on the site.

If the above steps are not complied with strictly, the right to claim the self-build exemption in connection with the revised/new permission is likely to be lost forever and full CIL will be payable in connection with it.

2. Where works have started but deviated from what was originally approved, a LPA will often request that the self-builder submit a new application (s73 or new application) to regularise the works. It is critical that a self-builder does not follow the LPA’s request blindly and submit a new application (s73 or new application) without seeking legal advice first because:

a. a new application (s73 or new application) means a new permission and chargeable development, which carries new CIL consequences;

b. a new application (s73 or new application) is different to an amendment under s96a which simply amends the existing permission by, for example, the substitution of new plans. An application under s96a is the only safe route for regularising the works on site without jeopardising the existing self-build exemption.

If the change is not material and is only required to regularise the position, then the LPA should not resist a s96a application, especially after the self-build position is explained to them.  Even if the LPA will not accept the justification for a s96a application a self-builder should refuse to comply with their request until seeking legal advice to confirm it will not open them up to an unexpected CIL liability that could be in the tens of thousands.

Part 2 of this Series will consider some of the options that could be considered if the second scenario above arises and the LPA will not accept a s96a application.

Setting the Tone

There is a general consensus that land should be “right priced”. Where it is viable the costs of providing both hard and social infrastructure needed to support development should be established and thoroughly tested so that they can be reflected in land values. The local plan and CIL examination and inquiry processes are an essential, if not perfect, basis for setting a viability benchmark.

Right pricing land will, however, often lead to values below landowners’ existing aspirations. Necessarily, it removes some hope value and reduces market value. It has been pointed out that this loss of expected value will lead to some landowners to hold back on their land, potentially starving the development market of a staple need. They will continue to ask for unadjusted values and that will cause problems since developers will not be able to pay those prices and still deliver policy compliant schemes.

One answer to this is that the CPO process can be used to buy land, at a price that reflects adopted planning policy and any CIL and realigns land value expectations. Quite rightly critics have observed that it is impossible to compulsorily acquire all the land required for 300,000 homes a year. There is no capacity within local authorities (or within housebuilders to be fair) to support such an effort. While that is true CPO powers do not need to be used to acquire all development land, just enough to make it clear that inflated expectations of site value should not stand in the way of housing delivery.

If the local plan and CIL processes work properly, and are held to account by those affected, there should still be a healthy margin, or incentive, for landowners to sell their land. The initial landowners affected would be rather like the unfortunate Admiral Byng, being subject to the judicious use of CPO powers “pour encourager les autres”.

Magic Bullets? Why Value Capture Should Be Kept Simple

The House of Commons Housing Communities & Local Government Select Committee Land Value Capture Inquiry report is great, but dangerous. It is a welcome reminder that the planning system can, and should, do more to capture the cost of the infrastructure required to support development. It is also problematic because it suggests a range of new “toys”, including a review of CPO compensation provisions, that is politically unworkable, a distraction and unnecessary.

Right Price

The report is clear that landowners, and developers on their behalf, already make significant contributions towards infrastructure and affordable housing. The combination of planning obligations and CIL can work effectively. With more local authority resource, greater transparency and a stronger emphasis on the local plan, even more can be achieved. As the report indicates, proper planning requirements should be viability tested and reflected in planning policy and a reformed and simplified CIL. Those needs will then, perhaps slowly, be “hardwired” into land prices. Land will be “right priced”.

No end to hope

A number of witnesses, and the evidence, emphasise that using planning policy is not a panacea. It will not fund all infrastructure requirements.  It will not solve the housing market problem.  Markets in different parts of the country are very different. The planning system can be used to secure a full contribution to infrastructure in parts of the South East, in a way that is simply impossible in parts of the North West.  Local planning processes can reflect those differences better than any sweeping national change.  Similarly, right pricing also requires some market sensitivity and testing. The aim should be to maximise the contribution that landowners make to infrastructure, whilst still allowing the land market to function. That means developing policies in a way that still leaves a sensible market value.

In urban areas that market value will, often, reflect the existing use value plus a sensible margin and an incentive to bring land to the market. For greenfield sites, the market value will need to reflect an amount needed for landowners, or promoters, to bring forward development and recycle value themselves into infrastructure delivery and place-making. However, landowners need to recognise that any existing “hope value” is not a permanent or fixed part of market value. As the market, planning policy and CIL levels change hope value necessarily also has to adjust. Any balancing exercise should diminish, but not dash, hope.

Thin Ice

Perhaps the more important Select Committee issue is the suggestion that the 1961 Land Compensation Act should be changed. In broad terms, the Committee recommend that land being compulsorily acquired should be acquired at existing use value instead of market value. That would be resisted. It would create a two-tier land market – with different values applying to adjacent plots depending on whether it is being sold on the open market or being publicly acquired. How would that work? Would that meet one of the tests that the Committee set for itself – fairness?

It is also unnecessary. The Committee attributes the success of the first generation of new towns to there being a different CPO compensation code, and suggests that the same result would not be achieved today. That is just wrong.  If a site for a new town is compulsorily acquired, the valuation will disregard the “scheme”.  In most cases, that will mean the land is acquired at something close to the existing use value – most sites would not be developed in the absence of the new town proposal. Even if, in the absence of the new town proposal, there would a development value to the site then a properly constructed planning policy framework will require any new development to fund the necessary infrastructure and the cost of doing so will be reflected in the land value.

Keep it simple

Why is there a need to change legislation to do something that can, largely, already be achieved without burdening the system with more complexity and change? It should be a fundamental principle of CPO compensation that landowners receive a proper market value for their land. The Parkhurst Road case has made it clear, quite rightly, that market values should reflect planning policy. If that happens, then the hope value component of market value will, properly, be adjusted by the proper attribution of infrastructure costs.   If, after the proper deduction of those costs there is still a margin and a residual hope value, what is the justification really, for amending the compensation code to take that?  If there is a justification for taking that capital gain then the tax system should be used to do so rather than playing games with compulsory purchase compensation which are ultimately likely to slow down development and unhinge investment.

CIL – Look both ways on Highways Obligations

Developers are often told that the CIL Regulations prevent ‘double dipping’ – where Community Infrastructure Levy (CIL) is spent on infrastructure for which financial contributions are also secured via Section 106 agreements (or, put the other way around, where S106 obligations are used for things the charging authority has said it will fund via CIL).

Not quite. In Oates v. Wealden District Council & Anor [2018] EWCA CIV 1304 the Court of Appeal confirmed that decision-makers may refuse planning permission for CIL-bearing schemes where highways impacts are sufficiently serious, even if the authority has previously said it will use CIL receipts for related highways works.

In Oates, the authority was considering an application for 390 homes on an unallocated, CIL-liable site which would have significant impacts on several junctions.

R123 Restrictions

Regulation 123 of the Community Infrastructure Levy Regulations 2010 does impose ‘double-dipping’ restrictions:

  • planning obligations may not be a “reason for granting” permission where they secure funding or provision or infrastructure on a published list (including in most cases through “requiring a highway agreement”) – regulation 123(2)
  • planning conditions are prohibited where they would require a highway agreement to fund or provide such infrastructure (or restrict development until a highways agreement is complete) – regulation 123(2A) also prohibits.

Be Wary

Developers should be very wary of the limitations of those controls. The authority’s R123 list in Oates identified highways works to the worst affected junctions as projects and types of infrastructure on which CIL would be spent.  The highway authority (County Council) objected to the application because critical improvement works were required to these junctions before development.  The impacts would be severe without guaranteed implementation and timing of the CIL-funded works. The  applicant resisted this on the basis that the R123 list meant that the necessary upgrades could “only be provided through the payment of a CIL contribution” and were not within the developer’s control or any proper restriction.  The County Council withdrew its objection on the strength of advice agreeing with that position. The LPA’s officer then reported this to committee.

The Claimant claimed that the misdirection on the effect of the CIL Regulations – wrongly assuming that a Grampian-type restriction on development until the upgrades were complete – rendered the consent unlawful.

No-Nonsense

The judgment is clear that the highway authority had failed to understand the “true scope of Regulation 123” – which does not “compel[…] the Local Authority to grant permission for a proposed development if, for whatever reason, that development is unacceptable in planning terms, or if it cannot be made acceptable either by a planning obligation, or by the imposition of conditions”.

The officer had directly ruled out a Grampian restriction on occupation until the mitigation works were complete, which would have been lawful.  Instead she had simply said nothing about it but had advised members the impact would be unlikely to be “severe” taking into account both build out rates and time for delivery of the infrastructure improvements funded by both CIL and other sources.  As such, that a restriction would be unjustified.

Look Both Ways

The judgment therefore underlines the need to:

  • understand the general development cost imposed by CIL
  • understand what is, genuinely, ‘necessary’ to make a scheme acceptable (bearing in mind the high bar set for the ‘severe’ impact threshold, for example, in relation to highways impact)
  • review what assumptions the planning authority and the CIL charging authority have made when assessing the viability of combined planning burdens for a particular site.

If its CIL-stage or Local Plan stage assessments have assumed – in setting a high CIL rate or justifying planning burdens – that CIL will ‘replace’ some forms of scheme-specific mitigation costs then that will often create a legitimate starting point for avoiding the double dip.

If not, it is worth looking both ways on CIL.

Time to fix CIL

The November 2017 Budget announcement on developer contributions, promised in the Housing White Paper, decided not to ditch the Community Infrastructure Levy but to tweak it instead.

Last January we suggested 6 reforms to make CIL more transparent and ensure it complements, rather than confuses, the development process. Here are the top 5 for 2018.

Reform #1 – deal with the small stuff, quickly

The recent amendment Regulations are welcome.  The Government should look to implement another set of amendment regulations by the summer, to deal with identified problems on indexation and give effect to the simplification on pooling restrictions promised in the Budget. It should reconsider the current proposal to use house price indices to inflate CIL.  Although transparent, there is no relationship between the change in values and the cost of delivering infrastructure.

There are better alternatives and consideration should be given to capping indexation rises where they exceed modelling assumptions at the CIL setting stage, giving a discount to the rate equivalent to any excess. That would encourage regular charging schedule reviews and ensure the charge remains within bounds of the original viability work.

Reform #2 – Free up strategic sites

The Budget committed to allowing a partial review of charging schedules. Among other things, that will allow charging authorities to look again at genuinely strategic sites and fix some of the problems that CIL-setting has created where errors were made or assumptions were not held to account in the examination process. The reform will allow zones to be set for these sites, with rates that reflect an agreed viability position including factoring in affordable housing delivery.

This can and should be implemented by the summer.

Reform #3– Free up strategic sites, again

For all the benefits of CIL recognised by both the CIL Review and the Budget, it is horribly complex for large, phased development.  The Review will need to grapple with how much flexibility can be created for genuinely ‘Strategic Sites’. CIL agreements should be allowed for these sites, which preserve the overall value of the infrastructure contribution (so that CIL is still a tool of value capture rather than mitigation management) but escape the complexity of the Regulations in terms of triggers, offsets and reliefs.  That will require careful thought on procurement issues, in terms of the point at which liability arises, and a more sensible approach to works in kind than the Regulations currently allow.

This can and should be implemented this year.

Reform #4 – Exemptions, distractions and diversions

There should be a proper debate about the sense in the reliefs, exemptions and offsets that plague CIL. If we want the system to be simpler, simplify it by removing these. As long as the charging regime ensures the charges adjust to reflect that, it will be neutral in many cases but far less complex.

Reform #5 – Spend It

One of the main gripes on CIL is the lack of certainty about its use (and the delay this is said to cause). In truth, many S106 contributions are subject to long clawback periods. In truth, too, CIL is only a drop in the ocean for infrastructure funding – it is unreal to expect it to be spent before match funding has been assembled or for it to deliver big bang projects on its own.

That said, two things need to be fixed:

  • CIL is meant to support the Local Plan. That is not always clear and the Government needs to consider tilting the balance from discretionary use of CIL, where it can be drained away from investment in new infrastructure to support Local Plans, to a slightly more prescriptive framework for some of the really big ticket items used to justify CIL setting in the first place.
  • Allowing CIL to be spent on maintenance of existing infrastructure is a mistake and undermines the benefit and legitimacy of the value capture it was designed to achieve. The changes made by the Localism Act 2011 to allow this were regressive and going back to the 2010 position – that CIL should fund new or upgraded infrastructure – would help concentrate spending and minds.

CIL fix is good news, more please …

After an absence, the tradition of new year Community Infrastructure Levy Amendment Regulations is back in the form of the draft Community Infrastructure Levy (Amendment) Regulations 2018, published on 14 December 2017.

The amendments are another sticking plaster ahead of a full overhaul of the CIL Regulations, this time to deal with difficulties that some authorities had got into on the application of indexation to CIL charges for S73 permissions.

Section 73 so simple

If a S73 permission is granted where no CIL charging schedule was in place at the time of the original permission, the CIL Regulations are intended to only charge the ‘top up’ change in CIL. That is entirely clear from Ministerial statements in the run up to the implementation of the Community Infrastructure Levy (Amendment) Regulations 2012 which introduced the regulation 128A regime (and various other changes) for such transitional cases.

A quirk of the drafting meant that – taken in an inappropriately literal way – the difference between indexation values for the original and the S73 consents would result a charge based on the application of the indexation change across the whole of the consented floorspace. So, for example, a S73 permission that in floorspace terms should have either zero, negative or minimal change in CIL chargeable value was being treated as having a charge relating solely to indexation change.

The Valuation Office rejected that approach on an appeal against the resulting chargeable amount in March 2017, which remains subject to stayed judicial review claim by the collecting authority.

No change

The amendment regulations now address this point by clarifying that the same indexation base value should be used for working out the chargeable value of each consent.

Although they will only come into effect later this winter, the Explanatory Memorandum states that they are clarificatory.

What lies beneath

That is important, because the ‘fix’ is partial and does not address all the mischief in the Regulations for S73 applications. By making it clear that the changes are ‘clarificatory’ we now know the Government agrees with the common sense interpretation of the Regulations the Valuation Office Agency has taken on appeal.

The Government should be commended for having listened and acted wisely. They should now make a habit of that on CIL – our next blog will include our New Year’s wish list for simplifying CIL.

In the meantime real care is still needed when dealing with S73 applications, indexation and abatement applications.