Community Infrastructure Levy (CIL) Under Scrutiny: Appeal Rulings Open the Door to Repayment Claims

Recent Community Infrastructure Levy (CIL) appeal decisions are creating opportunities for developers and are leading to repayment claims for charging authorities. Decisions focused on indexation, specifically whether CIL should be fixed at outline or reserved matters stage. They also considered the deduction of retained floorspace for schemes which can be carried out without a further planning permission, including permitted development schemes.

Indexation disputes 

At the heart of the issue is a technical, but highly consequential, question: at what point should CIL indexation be fixed? Recent rulings have increasingly favoured the interpretation that inflation should be applied at the point of outline planning permission, rather than at reserved matters stage. For schemes that have taken years to progress through the planning system, particularly during a period of high inflation, the difference can be substantial.

CIL, introduced in 2010, was designed to provide a predictable mechanism for funding infrastructure required to support development. While charging rates are set locally, the method of applying inflation is governed by national regulations. Those regulations, however, have left room for differing interpretations, particularly where outline permissions are followed by later approvals of detailed matters.

The crux of the debate lies in how the regulations define the relevant “planning permission” for the purposes of indexation. A literal reading suggests that the applicable index figure should be tied to the grant of planning permission, potentially the outline consent. However, many authorities have historically taken a more purposive approach, linking indexation to the point at which development is effectively authorised to proceed in detail.

This divergence has now been tested through appeal decisions, with outcomes indicating that the earlier date should apply. While this interpretation may align more closely with the wording of the Regulations, it runs counter to how some charging authorities have operated in practice, particularly on large, phased developments.

The consequence is that where authorities have indexed CIL at a later stage, they may have overcharged developers.

How this might look in practice: 

With an MCIL2 charging rate of £80 per sqm, a permission indexed at the outline stage (say, 2021) would equal c.£80.74 per sqm, compared to one indexed at the reserved matters stage (say, 2025) would equal c.£94.79. 

On an 8,000sqm development (or phase of development), this would result in a variation of £112,400 on MCIL2 liability, with Borough CIL also to be considered in parallel.

Recent appeal decisions have confirmed that the indexation of CIL should be tied to the grant of planning permission, often the outline stage rather than later approvals. For authorities that have indexed at the later stage for many years, this creates exposure to substantial repayment claims.

Consideration of retained floorspace

A key principle of CIL is that retained floorspace is deduced where the intended use following completion of the chargeable development is a use that can be carried out lawfully and permanently without a further planning permission on the day before planning permission first permits the chargeable development.

Whilst this is straightforward in most cases, for prior approval applications including under Class MA of Part 3 Schedule 2 General Permitted Development Order 2015 (as amended), it is relevant that residential use could be lawfully carried out on the day before Prior Approval was given. No further planning permission is needed to carry out the intended residential use because:

• it is the PD Right that grants “planning permission”, not the Prior Approval; and
• it is the notice of chargeable development which is the relevant trigger for when CIL is due under the CIL Regulations.  The Prior Approval had already been granted, and chargeable development therefore authorised, before the notice of chargeable development was submitted.

This stresses the importance of charging authorities issuing a liability notice, as stated within the CIL Regulations “as soon as practicable after the day on which a planning permission first permits development”. Not doing this for relevant permissions may result in a zero CIL being due.

Implications

The cumulative effect of these rulings is leading to a more cautious and forensic approach to CIL across the sector.

For local authorities, this means:

• Reviewing current and historic indexation practices
• Assessing potential repayment liabilities
• Changing practices on issuing liability notices

For developers, it means:

• Potential CIL refunds
• Instances where development may be CIL exempt where procedures are not followed

For assistance on how recent appeal decisions may be of relevance to a project you are working on please get in touch with our Planning team.