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Community Infrastructure Levy: Removal of Regulation 123

  • United Kingdom
  • Real estate
  • Real estate planning
  • Real estate sector

28-08-2019

The Community Infrastructure Levy (Amendment) (England) (No. 2) Regulations 2019 are due to come into force on 1 September 2019.

The 2019 Regulations were introduced by the Government earlier this year, alongside their response to the technical consultation on reforming developer contributions1. In this response, the Government stated that their reforms to developer contributions were intended to make the existing system “less complex and more transparent”.

The 2019 Regulations make a number of changes to the Community Infrastructure Regulations 2010, but one which is likely to have wide-ranging impacts is the deletion of Regulation 123.

Currently, the interaction between developer contributions paid through CIL and those secured through planning obligations entered into under section 106 of the Town and Country Planning Act 1990 is controlled by Regulations 122 and 123 of the CIL Regulations 2010.

Regulation 122 puts the Government’s policy tests on the use of planning obligations on a statutory basis, requiring that a section 106 obligation can only be taken into account when determining a planning application if the obligation is:

  • necessary to make the development acceptable in planning terms;
  • directly related to the development; and
  • fairly and reasonably related in scale and kind to the development.

Regulation 123 places further limitations on the use of section 106 obligations by:

  • requiring charging authorities to produce a list of the projects or types of infrastructure they intend to fund, or may fund, through CIL (‘Regulation 123 list’);
  • restricting authorities from seeking developer contributions for an individual infrastructure project through both CIL and section 106 obligations (referred to as ‘double-dipping’);
  • imposing a pooling restriction so that local authorities cannot pool more than five section 106 obligations to fund a single infrastructure project.

The 2019 Regulations will remove Regulation 123 in its entirety. Regulation 123 lists will be replaced by annual infrastructure funding statements setting out how much money has been raised through developer contributions (both through CIL and section 106 obligations) and how it has been spent. Authorities must produce their first statement by 31 December 2020.  

In their consultation response, the Government notes that these changes will allow authorities to use funds from both CIL and section 106 obligations to pay for the same piece of infrastructure. The response concludes that this will “enable more flexible and faster infrastructure and housing delivery” and that the reforms to increase transparency provide a “more appropriate mechanism” for controlling use of CIL and section 106 obligations than the current regulatory restrictions which were found to create “barriers to development”.

Whilst the Government’s stated aim is to make the system of developer contributions less complex and more transparent, there are concerns that the removal of the regulatory controls in Regulation 123 may actually result in the opposite.

Although the new infrastructure funding statements will include information on how much money authorities have collected in developer contributions and how it has been spent, it is unclear how authorities will ensure effective monitoring, regulation and control of the relationship between CIL and section 106 obligations.

With the removal of statutory Regulation 123 lists and the restriction on ‘double-dipping’ contained in Regulation 123, the only means of addressing the potential risk of double-counting between CIL payments and section 106 obligations will be through the limitations on the use of section 106 obligations set out in Regulation 122.

Regulation 122 assumes that the infrastructure to be secured through CIL will be identifiable and fixed for the whole development programme and that when entering into a section 106 agreement there is this certainty that the identified developer contributions will not be replicated in CIL payments.

However, with the removal of Regulation 123 lists, authorities will no longer be restricted in the application of anticipated CIL payments for any specific purpose. Authorities will be able to allocate CIL funds as they see fit and to re-direct such funds should the need arise.

This could cause issues for developers in a number of ways, including:

  • where an authority commits to use CIL to build facilities for the benefit of a development site and does not request section 106 obligations to fund such facilities but then re-allocates CIL to other projects leaving the developer without the facilities required by condition to be brought in support of the development;
  • where CIL has been set on the basis that the authority commits to use CIL for facilities required of the development and has contended there will be no ‘double counting’ or overpayment but then spends the CIL funds elsewhere and demands section 106 obligations for the otherwise absent facilities needed of the development.

It appears that the only way to avoid such difficulties would be for developers to ensure:

  • that their scheme is ‘zero rated’;
  • planning permission is secured before the CIL charging schedule is adopted; or
  • they seek specific commitments from the local authority (reinforced by the terms of any section 106 agreement) that it will only use CIL to secure certain specified infrastructure projects and that it will not allow any overpayment or ‘double-dipping’.

If you would like to discuss the above, other amendments made by the 2019 Regulations or for general advice on the Community Infrastructure Levy, please contact the team below.

1 Ministry of Housing, Communities and Local Government, “Government response to reforming developer contributions: A summary of responses to the technical consultation on draft regulations and the Government’s view on the way forward”, June 2019.

For more information contact

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