CIL: Plan carefully to avoid slipping up

The rigidity of the community infrastructure levy regime means one mistake can have significant financial implications – exemptions, deductions or reliefs may be lost, or surcharges imposed. In this article we consider some of the key takeaways from this year’s CIL cases for developers hoping to rely on those exemptions, deductions or reliefs. Failure to serve a notice before commencement can be costly In 2019, a number of changes were made to the relief and exemption provisions in the CIL Regulations. These changes only apply to developments where a liability notice or revised liability notice is issued on or after 1 September 2019. This distinction is an important one, as the developer in Heronslea (Bushey 4) Ltd v Secretary of State for Housing, Communities and Local Government [2022] EWHC 96 (Admin) found out. In that case, the developer was eligible for social housing relief, but lost their right to the relief because they failed to submit a commencement notice before commencement. Not only that, but the developer also had to pay late payment interest on the full CIL amount – as the collecting authority had to deem a commencement date, the full amount became payable on that date, but as that date had already passed, payment was automatically late. However, luckily for developers now, where the updated CIL Regulations apply, social housing relief is no longer lost if a commencement notice is not served on time – but the collecting authority must impose a surcharge capped at £2,500 and late payment interest will still be payable.  The self-build housing exemption and social housing relief are not available for retrospective planning permissions A developer must assume liability to pay CIL after planning permission has been granted but before development has commenced. While this is possible for prospective permissions where that gap could exist, that is not the case for retrospective permissions where, under the CIL Regulations, such permissions are to be treated as commencing on the day permission is granted. A developer can only benefit from the self-building housing exemption or social housing relief if they have assumed liability to pay CIL. Accordingly, neither the self-build housing exemption nor social housing relief are available for retrospective permissions because it isn’t possible for a developer to assume liability by the appropriate point in time R (on the application of Gardiner) v Hertsmere Borough Council and another [2022] EWCA Civ 1162; [2022] PLSCS 138).  Demolishing a building before planning permission is granted is risky The floorspace of retained parts of in-use buildings can be deducted from the amount of floorspace that is CIL-chargeable (known as the in-use deduction). An in-use building is: (a) one situated on the relevant land on the day on which planning permission first permits development (usually the date permission is granted, or later for outline or phased permissions); (b) which contains a part that has been in continuous lawful use for at least six months within the three years preceding the date that permission first permits development. A few developers have recently become unstuck because they demolished so much of the building onsite before planning permission was granted, that it no longer constituted a building on that date – and, as such, the in-use deduction did not apply. There is no definition of a building in the CIL Regulations. It has also been held by the Valuation Office Agency that it is inappropriate and incorrect to use the definition of a building in the Town and Country Planning Act 1990 for CIL purposes (VOA appeal references 1769274 and 1768442). Instead, it must be given its dictionary definition – “a thing which is built; a structure; an edifice; a permanent fixed thing built for occupation, as a house, school, factory, stable, church, etc” or “a structure with a roof and walls, such as a house or factory”. In two separate appeals, buildings had been partially demolished, only leaving in place the original building footprint or slab, the foundations and some walls on the date permission was granted. The registered valuers in each case held that the in-use deduction didn’t apply because there weren’t sufficient structures remaining onsite to be classified as buildings on the relevant date (VOA appeal references 1777433 and 1776057).  Sufficient evidence is needed to demonstrate that a building is in-use  It is important to provide the collecting authority with sufficient information of sufficient quality to enable it to establish that a relevant building is an in-use building, otherwise it can deem that the in-use deduction doesn’t apply. The evidence must demonstrate continuous use within the correct time period. Developers should also be wary of contradictory statements made in application documents or published on other public forums. One developer tripped up in trying to prove that a shop had been in use for the relevant period – electricity bills provided fell outside of the period and the usage was so low that they were commensurate with non-operational premises; sale particulars described the premises as being closed; and the application documents referred to the premises being vacant for the previous four years (VOA appeal reference 1774953). Another developer provided a licence to occupy (which itself does not prove use), various statements and utility invoices, but these only suggested that a school building had been sporadically used for rehearsals and therefore the grounds for an in-use deduction had not been met (VOA appeal reference 1779549). Ultimately, if developers want to ensure that they will benefit from any relevant reliefs, deductions or exemptions, they should double-check all procedural and evidential requirements in advance and factor this into their planning strategy.  Caroline Stares is a senior associate at Hogan Lovells International LLP Image © Creativ Studio Heinemann/imageBROKER/Shutterstock