Coalition mulls change to levy rules

The government is considering calls for the regulations governing a new levy on development to be amended to ensure that developers do not face unanticipated liabilities should they seek to change the conditions of their planning permissions.

Tottenham Hotspur: club's stadium scheme has consent and section 106 deal, but any change to plans could result in a CIL charge
Tottenham Hotspur: club's stadium scheme has consent and section 106 deal, but any change to plans could result in a CIL charge

Planning has learned that the Department for Communities and Local Government (DCLG) is considering a plea from a group of public and private sector bodies - including the office of London mayor Boris Johnson - to amend the 2010 Community Infrastructure Levy (CIL) regulations.

The mayor's office, along with business body London First and lobby groups the British Property Federation (BPF) and the Home Builders Federation (HBF), have written to the DCLG to express their concern over the implications of the current CIL regulations for developers seeking to use section 73 of the Town and Country Planning Act 1990 to amend schemes that already have planning permission.

Developers whose schemes received planning permission before a CIL charging schedule comes into effect are not required to pay the levy.

But under the CIL regulations, a permission to vary or remove an existing planning permission via section 73 triggers a liability to pay the levy.

In the letter to the DCLG, the mayor's office, London First, BPF and HBF warn that this would mean that if a developer with a planning permission granted before a charging schedule comes into effect wants to change a condition through section 73 after the tariff is up and running, the whole development would become liable to pay CIL.

According to the signatories of the letter, this will affect the financial basis on which development is put forward and the unexpected liability could in many cases - particularly for larger schemes - be significant enough to make projects unviable.

Planning understands that the mayor's office is concerned that, in cases where the unanticipated liability does not make whole schemes unviable, it could lead to the renegotiation of section 106 planning gain deals.

A source said that the mayor's office is worried that the issue could affect a small number of large developments with complex section 106 agreements that have been arrived at after lengthy negotiations. "What we don't want is old section 106 agreements being unpicked," the source said.

BPF chief executive Liz Peace said: "In practical terms, this could mean schemes important to the development of London either not proceeding at all or being subject to significant delay as section 106 agreements are reopened and renegotiated."

There are also fears that the regulations mean developers could be required to pay CIL twice. It is possible that after a charging schedule is adopted in an area, a planning permission could be granted and implemented with all of a CIL liability paid. If the developer then sought to change a condition of its planning permission using section 73, this would result in a new permission and a new CIL liability.

A DCLG spokesman said: "We have received the representations. We are giving consideration to the issue."

Faraz Baber, executive director for policy at London First, said: "The government, I believe, has received our representations positively and is looking into how the issue can be dealt with."

He added: "We are confident and hopeful that we have provided the government with the information that it needs."

Richard Serra, head of planning in the Leeds office of property firm Savills, said that the regulations as they stand would "act as a serious brake on development".

He said that the regulations would mean that, if developers with a consented scheme want to amend it in any form in an attempt to make it more viable, "they would be clobbered with CIL".

CIL and Section 106 A primer

Q: What is the CIL?

A: CIL is a new tariff that English and Welsh councils can charge on most types of development in their area. The money raised can be used to support development by funding local infrastructure.

Q: When does it come into force?

A: The first CIL tariff is already in force: Newark and Sherwood District Council in Nottinghamshire started charging on 1 December. Shropshire Council and the London Borough of Redbridge are due to start charging CIL on 1 January.

Q: Does it replace section 106 entirely?

A: No. But section 106 planning gain agreements are being scaled back. From April 2014, or from the date that a CIL charge is adopted by a local planning authority, limitations will make it harder for authorities to rely on section 106 to fund infrastructure.

Q: So what role does section 106 continue to play in authorities that have a CIL charge in place?

A: Once a CIL charge is in place, there can be no double charging. Anything that is included in a council's list of items it intends to fund through CIL cannot be paid for through a section 106 agreement. A council will be able to pool no more than five contributions for an item of infrastructure not funded by CIL. But section 106 will continue to be the primary mechanism for securing affordable housing contributions through the planning system.

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