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Developers can dodge Community Infrastructure Levy with levy 'loophole'

A developer has avoided paying Community Infrastructure Levy (CIL) of more than £170,000 by making separate planning applications for internal and external works.

Planning permission is required for internal alterations that will increase the gross floor space of a building by more than 200 square metres, where the building is used for the retail sale of goods other than hot food. Planning permission is also required for external works to a building. If a local planning authority has adopted a charging schedule, then the developer will, except in limited circumstances, be liable to pay the Community Infrastructure Levy. There are some exemptions, which a retail park owner successfully relied on in R (Orbital Shopping Park Ltd) v Swindon Borough and another [2016] EWHC 448 (Admin).

Details of the case

A retail park owner, Orbital, made two separate applications for planning permission for the same shop unit. These were for:

  • the installation of a mezzanine floor increasing the floor space by 1,709 square metres: and 
  • external works incorporating new shop fronts. 

The two applications were deliberately kept separate. This is because Orbital believed that the mezzanine application, as it only related to internal works, was covered by the exemption set out in article 6(1)(c) of the CIL Regulations 2010, and would therefore not incur CIL liability. The effect of article 6(1)(c) is that internal works do not constitute development for planning purposes and do not therefore incur CIL. The outside works were not liable for CIL because they did not increase the floor space. 

The Council did not agree and issued a CIL liability notice and demand notice for £170,900. It argued that the two applications, which had been described as a "package of applications" and which were carried out as one development, should be treated as one application. If the applications were combined, they would no longer just relate to internal works and the developer would have to pay CIL on the increased floor area.  

Orbital made an application for Judicial Review on the basis that the Council had acted unlawfully in issuing the CIL liability and demand notices. 

High Court ruling

The High Court ruled that the Council had been wrong to demand CIL. Both applications would appear separately on the planning register, and would be registered as separate local land charges. The Court agreed it was possible to implement permissions for the mezzanine and shop front works separately, and that they might in any event be carried out at different times for operational reasons. 

What does this mean for developers?

In this case the submission of two applications was clearly intended to avoid liability for CIL, but the Court has held that there is nothing in the legislation to prevent such a strategy. The developer simply took advantage of the current legislation.   

This decision highlights that CIL liability should be a key consideration for developers and their agents at the very early stages of considering their planning application strategy in order to maximise cash flow and potentially the viability of a site.

The CIL regulations have been subject to numerous amending regulations since they were first published on 6th April 2010. In view of the Court’s decision in this case, the government may consider amending the regulations once more.  

Contributor: Juliet Allan-Jones

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at April 2016. Specific advice should be sought for specific cases. For more information see our terms & conditions.

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