CIL: There Is No Equity About A Tax

“…in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.”

This passage comes from a 1921 case, Cape Brandy Syndicate v IRC, and was quoted this week by Thornton J in the latest case about a self-builder who had unwittingly lost any right to an exemption from the community infrastructure levy: Gardiner v Hertsmere Borough Council (Thornton J, 6 July 2021). (For a previous unfortunate tale see my 19 January 2019 blog post CIL The Merciless).

The purpose of this post is simply to point out again as to how important, but difficult, it is to arrive at an accurate interpretation of the Community Infrastructure Levy Regulations.

This latest case raised “a point of principle as to whether the self-build exemption provided for in Regulation 54A of the Community Infrastructure Regulations (2010/948) (the CIL Regulations) applies to the grant of planning permission, pursuant to S73A TCPA, for development already carried out.

Query why there is a self-build exemption in the first place for such large self-build schemes as those which end up in these sorts of disputes, but on a wider basis the case is certainly a warning of the CIL consequences of carrying out development in breach of planning control…

“The Claimant is a self- builder who obtained planning permission for partial demolition of, and extension to, his existing chalet bungalow at 59 Aldenham Avenue, Radlett, Hertfordshire, WD7 8JA (“the Site”). CIL was not payable as the Defendant exempts residential extensions from the levy. The Defendant’s planning officers visited the site during the course of the demolition work and considered that the works undertaken had gone beyond the works authorised by the planning permission. They were of the view that the development was unauthorised. In response the Claimant submitted a new planning application to regularise the demolition works undertaken and to permit the subsequent rebuild now required (as opposed to the former extension) of the house. Planning permission was subsequently granted, part-retrospectively, pursuant to s.73A TCPA for the demolition and the erection of a new detached 6-bed dwelling.

The Defendant [Hertsmere Borough Council] is the charging and collecting authority for CIL in the area of Radlett, Hertfordshire. The Interested Party [the Secretary of State] was joined by order of Mr Justice Holgate and directed to produce written submissions to assist the Court as the claim raises issues of interpretation of the CIL Regulations which may have wider implications.”

The case was despatched by Thornton J in short order:

“It is […] apparent, when the ‘strict criteria’ in Regulation 54B(2) are tested against the grant of planning permission, pursuant to Section 73A TCPA, for development already carried out, that they bar the availability of the exemption for such permission.

Firstly; the claim for an exemption must be made by a person who “intends to build, or commission the building of, a new dwelling” (Reg 54B(2)(a)). The references to ‘intends’ and ‘commission’ are forward looking. They are not consistent with an application by a person who has already built or begun to build a dwelling.

Secondly; the claim must be made by someone who has assumed liability to pay CIL in respect of the new dwelling’ (Regulation 54B(2)(a)(ii)). The assumption of liability is a prerequisite to obtaining the exemption. Yet this is not possible for retrospective planning permission granted under Section 73A TCPA, by virtue of Regulation 7(5) and 31 CIL Regulations. Regulation 31 governs the assumption of liability. It refers to “a person who wishes to assume liability in respect of a chargeable development”. The precise use of the words “a chargeable development” make clear that a chargeable development must exist in order for a person to assume liability to pay CIL in respect of it. In other words liability cannot be assumed under Regulation 31, in respect of a chargeable development, until such time as the chargeable development exists. This is necessarily after planning permission has been granted, by virtue of Regulation 9(1). Liability cannot be assumed for something that does not exist and may never exist (if planning permission is not granted).”

“The Claimant’s wife pointed out in correspondence that “our record of engagement with the Council clearly reflects our respect for the [planning] process and that we are exactly the type of residents to whom the CIL exemption is supposed to be available”. In response, the Defendant acknowledged that “the circumstances of this case that caused the CIL liability to be triggered may seem unfair”.

To which Thornton J’s response was the passage at the beginning of this post.

Thornton J handed down judgment in another CIL case at the end of May, London Borough of Lambeth v Secretary of State (Thornton J, 28 May 2021), with another tough outcome for the party liable to pay CIL.

The Lambeth case considered whether a surcharge for late payment of the levy is dependent on the service by a collecting authority of a liability and/or a demand notice and whether, where a revised liability and/or demand notice is issued or served, previously incurred late payment surcharges cease to be payable? In essence, if you were liable to pay CIL but failed to pay it & then only subsequently does the charging authority issue its liability or demand notice, is it fair that the authority can still levy a surcharge for non-payment?

The Claimant [the London Borough of Lambeth] contends that liability for a late payment surcharge is:
a. not contingent on the service of a Liability or Demand Notice; and
b. the issue/service of a revised Liability and/or Demand Notice does not have the effect of extinguishing liability for a late payment surcharge which has already been incurred.

The Defendant [the Secretary of State] accepts that the Claimant’s interpretation of the CIL Regulations is correct and concedes the claim.

The Interested Party [Thornton Park (London) Limited] continues to contest the claim. The Interested Party’s case before the Inspector and this Court is that the effect of Regulation 65(9) is that the issue of a revised Demand Notice means that any previously served Demand Notices cease to have effect so a surcharge for late payment can only be imposed 30 days after service of the revised notice, as per Regulation 85(1).

“The essential factual background is as follows: the Claimant granted planning permission for development, for which the Interested Party assumed responsibility for payment of CIL and in respect of which the Claimant duly served a Liability Notice. On 23 November 2018, the Claimant served a Demand Notice stating the amount payable by the Interested Party to be £5,549,963.41 and that the amount was payable in two instalments: on 25 January 2019 and 24 July 2019. Those instalments were not paid. On 18 September 2019, the Claimant granted the Interested Party’s application for a non-material amendment to the planning permission resulting in a change of the chargeable amount. Revised Liability and Demand Notices were served to reflect the changes. On 15 October 2019, the Claimant issued a revised demand notice to include late payment surcharges. The Claimant issued a further revised Liability Notice on 27 November 2019 followed by a revised Demand Notice (including late payment surcharge [of £465,617.67]) on 10 December 2019, to account for further changes to the development and thus to the chargeable amount. In response the Interested Party appealed [successfully] against the payment of the surcharge on the basis that the breach which lead to the imposition of the surcharge had not occurred.”

The council challenged the inspector’s decision. Thornton J concluded that the inspector had “erred in finding that the Claimant had no lawful authority to impose a late payment surcharge with respect to unpaid CIL. Liability for a late payment surcharge is not contingent on the service of a Liability or Demand Notice. The issue/service of a revised Liability and/or Demand Notice does not have the effect of extinguishing liability for a late payment surcharge which has already been incurred.”

As stated by Thornton J in Gardiner, and stated in similar terms in Lambeth:

The Community Infrastructure Levy is akin to a tax. The proper interpretation of tax legislation requires a close analysis of what, on a purposive construction, the statute actually requires”.

Forget about trying to what work out what might have been equitable. Just read the Regs.

Cheerful point for the future: CIL’s mooted replacement, the Infrastructure Levy, will also be “akin to a tax” and of course will contain a whole new set of trip hazards and uncertainties. Given that there can be little room for flexibility, or consideration of what may be an equitable outcome, at the point of liability, the legislation itself inevitably ends up having to allow, as best it can, for all permutations of situation and that’s where the complexity comes (and grows with every amendment).

Simon Ricketts, 10 July 2021

Personal views, et cetera

Two events coming up this week:

Our clubhouse Planning Law, Unplanned session at 6 pm on Tuesday 13 July, is entitled “JR = VAR? Reviewing judicial review & human rights protections”. What are the Government’s proposals for judicial review & human rights reform and what are the potential practical implications for the planning system in particular? The discussion will be led by Charlie Banner QC (Keating Chambers), Celina Colquhoun (39 Essex Chambers and former member of the Faulks review) and Joshua Rozenberg (honorary QC, leading legal commentator & author of “Enemies of the people: How Judges Shape Society”).

Please feel free to join us, whether to take part in the discussion or just to listen. Invitation to app & event here.

A joint Town Legal and 39 Essex Chambers webinar is also taking place, at 5 pm on Thursday 15 July: Judicial Review & The Planning System in 2021: Practical tips, current trends, what’s round the corner?

Please free to register here.