Community Infrastructure Levy: Avoiding the Pitfalls

Three recent decisions by the Planning Inspectorate are useful reminders of some of the pitfalls for developers under the Community Infrastructure Levy Regulations. Getting it wrong when it comes to CIL can be an expensive mistake, resulting in the loss of relief and the imposition of surcharges and interest. This can be a significant and unwelcome cost. 

The cases are a helpful reminder of how inflexible the Regulations are and why developers must ensure that their house is in order before commencing development. 

What forms must be submitted before development commences?

To recap:

  • The authority must issue a Liability Notice ‘as soon as practicable’ once the planning permission first permits the chargeable development. This will depend on the type of planning permission, but for a full, unphased planning permission, authorities should issue the Liability Notice as soon as practicable after the permission is granted. 
  • The developer will usually then need to submit an Assumption of Liability Notice and a Commencement Notice before development begins. Where the development is eligible for relief (e.g., because it includes affordable housing) the developer should apply for relief when submitting the Assumption of Liability Notice and should wait for the authority to issue a revised Liability Notice confirming the amount of relief granted before submitting the Commencement Notice.
  • Following receipt of a Commencement Notice, an authority will then issue a Demand Notice for the CIL due (which will be payable in accordance with any instalments policy in force).    

Why are Liability Notices so important?

The first decision is a helpful reminder to authorities that they should not wait to receive an Assumption of Liability Notice before issuing a Liability Notice.  Where a development is liable to pay CIL, the Liability Notice is a critical document. Until it is issued the developer cannot serve a valid Commencement Notice before commencing development.    

In a judgment handed down last month, the High Court held that Hertsmere Borough Council, by issuing a Liability Notice almost 18 months after the planning permission was granted, had failed to comply with its obligation under the Regulations to issue it ‘as soon as practicable’.  Consequently, the Council’s Demand Notice was invalid, and it could no longer recover the CIL due.

Commencement Notices:  What are the risks?

A Commencement Notice must be submitted to the authority at least one day before development commences. The authority is required to acknowledge receipt.  Failing to submit a Commencement Notice can result in a surcharge being imposed, which will be 20% of the CIL due or £2,500, whichever is the lower amount.

The second and third decisions confirm that it is the responsibility of the developer to ensure that the authority has received the Commencement Notice.  In one case, the Inspector considered that a developer who submitted a Commencement Notice to the Council’s Building Control Department, had not complied with the Regulations as Building Control is not part of the Council’s function as a collecting authority under the Regulations. A developer will therefore be taking a risk by commencing development without written acknowledgement from the authority to confirm receipt of the Commencement Notice. 

Comment

Developers may need to be proactive and chase the relevant authority to issue a Liability Notice (or a revised Liability Notice following an application for relief).  By commencing a development, the CIL liability becomes fixed and can no longer be challenged under the Regulations.  Steps should be taken to ensure that the CIL liability is understood and agreed before development commences. 

Although CIL may be replaced by a new “Infrastructure Levy” in the future (which we have written about here), developers will have to navigate the current rules, which are inflexible and unforgiving, for some time to come. 

If you have any queries in relation to CIL, please contact James Clark in our Planning & Environment Team who will be happy to help. 

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