Navigating the complexities of the CIL regulations

With the CIL regime winning the government’s support, Hannah Quarterman offers a reminder of how it operates. When the Bill that became the Levelling-up and Regeneration Act 2023 first landed, one of the most headline grabbing changes proposed was the replacement of the community infrastructure levy with a new infrastructure levy. However, the Labour administration has confirmed it is abandoning IL, and that CIL is here to stay. What is the basis on which CIL is charged? One key change to be introduced by IL was the method of calculation, shifting towards a sum based on gross development value (although this was never fixed in the legislation passed). The position now remains that CIL will be charged based on a rate per sq m, and can vary from place to place and from one use to another within a charging authority’s area. Is it always as simple as multiplying floorspace by a fixed rate? Not at all. One of the criticisms the CIL regime has faced is the complexity involved in calculating what is owed. For example, “in use” floorspace can be deducted from the calculation, so CIL is only theoretically charged for an increase in relevant floorspace. However, to qualify, floorspace must have been: in lawful use; for a continuous period of at least six months; and that use must have been within the period of three years, ending on the day the planning permission first permits the relevant chargeable development. This can lead to legal and factual debates about whether a building – or enough of a building – was in qualifying use during the relevant period. This can in turn be impacted by any delay by the local planning authority in granting planning permission. What happens if you change planning permission? There was a time when securing a new permission could have extremely onerous financial implications. Although the position has been simplified, it is still important to consider CIL as part of any planning strategy, especially when moving from one consent to another. The legal position will vary, depending on the factual context. Where a site benefits from an existing permission, in respect of which CIL was paid, you may be able to offset – or “abate” – the CIL already paid against the new liability. However, where a permission is granted pursuant to section 73 of the Town and Country Planning Act 1990 to vary a condition on an existing planning permission, a notional calculation must be carried out: to calculate CIL as if planning permission were granted on the same date for both the original and the new permission. Where the figure for the new permission is higher, you must pay that additional amount. This should mean that you only pay for the increase in floorspace, not increases arising from higher CIL rates. Do you always pay CIL on all new floorspace? No. When the total new floorspace is less than 100 sq m, no CIL is payable. There are also situations in which relief is available in respect of certain types of floorspace, such as social housing relief and charitable relief. In both of these cases you discount the floorspace put to the relevant use when calculating CIL. However, there are strict procedural requirements regarding reliefs, and a seemingly innocuous procedural irregularity can prove very costly, as it could mean that all reliefs are lost. What is the position regarding affordable housing? One of the most revolutionary changes promised by IL was a change in how affordable housing was delivered. By bringing it into the definition of infrastructure, charging authorities could use funds raised through IL to provide their own affordable housing. Alternatively, they could require developers to discharge part of their IL liability by the provision of affordable housing on site. That will now not come to pass, and the provision of affordable housing remains a requirement which will be controlled via section 106 agreement, alongside CIL liability. What else should I be aware of? The CIL regime remains a knotty one, with many complexities to be aware of, such as: Each phase of a development can be treated as a separate development, meaning that CIL can be staggered, provided adequate care is taken with the wording in the planning permission. As retrospective permissions do not benefit from certain reliefs, it is important not to inadvertently secure this type of consent, for example by seeking to regularise changes in plans. This can be a very costly mistake. Now CIL is staying, will it apply everywhere? No. It remains the case that liability for CIL only arises where there is a charging schedule in place, and there are many places across the country where there isn’t one. The prospect of a switch to the  new IL regime may have exacerbated this issue, as relevant authorities may have paused work on adopting a schedule, seeing that as potentially wasted cost. On the other hand, CIL has been around for a while and, unlike IL would have been, isn’t mandatory, so if an authority hasn’t embraced CIL already, it seems unlikely that it will do so now. However, what we may see instead is a flurry of charging authorities looking to update their charging schedules to increase the amount of CIL payable, now that it seems set to stay. There are few who argue that CIL is perfect. However, after a few years flirting with alternative options, many will be happy to continue dealing with the regime we have all grown accustomed to – for better or worse. Hannah Quarterman is a partner and head of planning at Hogan Lovells Image © Alexander Pohl/Shutterstock