HERONSLEA (BUSHEY 4) LIMITED (R on the application of) v SECRETARY OF STATE FOR HOUSING, COMMUNITIES AND LOCAL GOVERNMENT

The Claimant seeks judicial review of the decision, dated 31 December 2020, of an Inspector appointed by the Defendant (Footnote: ¹), which was made under regulation 117 of the Community Infrastructure Levy Regulations 2010 (“the CIL Regulations”), dismissing the Claimant’s appeal against late payment surcharges, pursuant to regulation 85(1) and (2) of the CIL Regulations.

The Claimant is the owner and developer of land at Lincolnsfield, Off Bushey Hall Drive, Bushey, Hertfordshire WD23 2ES (“the Site”). Hertsmere Borough Council (“the Council”) is the local planning authority and the charging and collecting authority under the CIL Regulations for the area in which the Site is situated, and made the decisions which were the subject of the Claimant’s appeal. The Council applied to be removed as an Interested Party from these proceedings and has played no part in them.

The issues in the claim may be summarised as follows:

Ground 1: whether the Inspector erred in law in concluding in his Decision Letter (“DL”) that, on a proper interpretation of regulation 51(7)(a) of the CIL Regulations, the Council was entitled to withdraw social housing relief, in the sum of £320,034.73, by reason of the Claimant’s failure to comply with the requirement, in regulation 67(1), to submit a commencement notice before the chargeable development commenced;

Ground 2:whether the Inspector erred in law in concluding that, on a proper interpretation of regulations 31(3) and 71(2) (which he wrongly identified as regulation 70), the date on which payment of the CIL was due, for the purpose of triggering the late payment surcharges in regulations 85(1) and (2), was 19 June 2019 (the deemed commencement date), and not 11 February 2020 (the date on which the Council issued the second demand notice).

Permission was granted by Waksman J., on the papers, on 14 June 2021.

On 28 February 2019, the Council granted the Claimant full planning permission for development at the Site comprising “demolition of buildings to south of Lincolnsfield Centre and redevelopment to provide 55 residential dwellings including alterations and improvements to the existing internal roads, associated vehicular parking, watercourse enhancement, refuse and amenity provision and landscaped areas”.

On 27 February 2019, the Claimant entered into an agreement with the Council under section 106 of the Town and Country Planning Act 1990, under which it entered into planning obligations to provide 21 affordable housing units at the Site, comprising 13 affordable housing rented units, 6 shared ownership units and 2 equity share units, at the Site.

On 21 March 2019, the Claimant submitted an Assumption of Liability Notice to the Council, pursuant to regulation 31(2) of the CIL Regulations, in which it assumed liability to pay CIL in respect of the development.

On 1 April 2019, the Council sent an Acknowledgment Notice, confirming receipt and stating that it had recorded the Claimant as the liable person under the CIL Regulations. Under the heading “Next Steps”, it stated, among other matters:

On 8 May 2019, the Claimant submitted a claim for social housing relief from the CIL, dated 8 May 2019. Although the claim was not included in the bundle of evidence, I was shown a copy of the template “Form 2: Claimant exemption or relief” which was in use at the relevant time. It stated:

The form required the Claimant to sign a declaration which stated, inter alia:

That my claim for relief will lapse where:

development commences on this chargeable development prior to the collecting authority informing me of its decision

a commencement notice is not submitted prior to commencement of development of the chargeable development to which this relief applies

On 14 May 2019, the Council issued a “Relief Claim Decision Notice” to the Claimant which granted “mandatory social housing relief for the chargeable development” because the 21 affordable housing units which the Claimant agreed to provide were “classed as qualifying dwellings as defined by Regulation 49” of the CIL Regulations. The qualifying amount of social housing relief was calculated as £320,034.73.

The Decision Notice then stated:

a commencement notice is not submitted to the collecting authority;

Also on 14 May 2019, the Council issued a Liability Notice (No. LN00000836) to the Claimant, pursuant to regulation 65 of the CIL Regulations, in respect of the chargeable development. The chargeable amount was £1,451,899.58. However, the total liability was reduced to £1,131,864.85 because a deduction was made for social housing relief in the sum of £320,034.73.

The Liability Notice stated:

The Liability Notice then set out in more detail the procedure which the Claimant had to follow:

Finally, the Liability Notice referred the Claimant to online sources of further information, and invited the Claimant to contact the Council if it required further information or had any queries.

On 19 June 2019, the Council carried out a CIL site monitoring visit and discovered that the Claimant had commenced work at the Site. The Inspector found that buildings had been demolished, and trenches dug, thus changing the physical appearance of the Site (DL6). Applying the test in regulation 7 of the CIL Regulations, the works amounted to material operations sufficient to commence the chargeable development. In breach of the requirements of regulation 67(1), no Commencement Notice had been submitted by the Claimant before the works commenced. The Council therefore deemed 19 June 2019 to be the commencement date, pursuant to regulation 68.

The Claimant did not appeal the Council’s determination of the deemed commencement date as 19 June 2019, under regulation 118 of the CIL Regulations. At DL6 and DL18, the Inspector agreed with the Council’s decisions under regulations 7 and 68, and there is no challenge to his conclusions on these issues in this claim.

On 5 August 2019, the Council issued a revised Liability Notice (LN00000877) to the Claimant, which stated that the amount of relief awarded was nil, and that the Claimant was now liable to pay an increased charge, assessed at £1,451,899.58. It gave revised information to the Claimant, confirming that “[r]elief is not offered” and the payment date was reduced from 60 days to zero days:

The effect of issuing the revised Liability Notice was that the earlier Liability Notice ceased to have effect: see regulation 65(8) of the CIL Regulations.

On 5 August 2019, the Council also issued a Demand Notice (LN00000877), pursuant to regulation 69 of the CIL Regulations. It identified the date of deemed commencement of development as 19 June 2019. It stated that the outstanding amount of CIL payable (£1,451.899.58) was “due for payment immediately (except if there is an appeal) and is subject to interest being added” and surcharges being applied. Reasons were set out as follows:

A schedule at the end of the notice stated that a surcharge in the sum of £2,500 had been applied, for failure to submit a commencement notice. It also stated that no late interest had been applied. The notice set out the possible consequences of failing to follow the CIL payment procedure and late or non-payment. In addition to the surcharge for failure to submit a Commencement Notice, late payment surcharges could be imposed as follows:

Five percent of the outstanding amount where payment is still overdue after six months, subject to a £200 minimum.

Five percent of the outstanding amount where payment is still overdue after 12 months, subject to a £200 minimum.”

In an email dated 9 August 2019, the Council informed the Claimant that a revised Liability Notice and the Demand Notice had been issued because the Claimant had commenced development on Site, without prior submission of a Commencement Notice. It reminded the Claimant that the application form for relief (Form 2) had stated that a Commencement Notice must be sent prior to the commencement of development, otherwise the full levy charge would become payable, and it referred the Claimant to regulation 51 of the CIL Regulations.

The Claimant did not lodge an appeal against the Liability Notice and Demand Notice, dated 5 August 2019, despite the loss of the social housing relief and the erroneous reason given in the Demand Notice, namely, that a “disqualifying event for relief purposes has occurred”. Nor did the Claimant seek to challenge the lawfulness of the Demand Notice by way of a claim for judicial review.

There followed email communications between the parties, including an email from the Council dated 27 January 2020 which stated:

On 11 February 2020, the Council issued a revised Demand Notice (LN00000877). It identified the date of deemed commencement of development as 19 June 2019. It demanded a total payment of £1,627,652.97 including:

a chargeable amount of £1,451,889.58;

a surcharge of £2,500 pursuant to regulation 83 of the CIL Regulations, imposed for failure to submit a commencement notice;

two surcharges totalling £148,819.71 for late payment pursuant to regulation 85(1) and (2);

interest in the sum of £24,433.68 pursuant to regulation 87.

The Demand Notice gave the reasons for issuing the notice as follows:

The effect of serving the revised Demand Notice was that the earlier Demand Notice ceased to have effect: see regulation 69(5) of the CIL Regulations.

On 10 March 2020, the Claimant appealed against the imposition of the surcharges, pursuant to regulation 117(1) of the CIL Regulations, on grounds (a), (b) and (c).

On 30 March 2020, the Claimant made a part payment of its CIL liability, in the sum of £1,131,864.85.

The Inspector (Mr A.U. Ghafoor BSc (Hons) MA MRTPI) dismissed the appeal in a DL dated 31 December 2020, for the following reasons (all references below are to the CIL Regulations):

The first liability notice issued on 14 May 2019 satisfied regulation 65(2) (DL4).

In breach of regulations 7 and 67(1), the Claimant failed to submit a commencement notice before chargeable development commenced (DL5, DL6, DL18). This was a “flagrant breach of the regulations” and “marked a significant turning point in the site’s history” (DL11).

By regulation 68, the Council had to determine a deemed commencement date, which was to be included in a demand notice under regulation 69(2) (DL5).

The Council was required to issue a second liability notice on 5 August 2019, as the loss of the social housing relief was a material change to the first liability notice, which ceased to have effect when the second notice was issued (DL7).

The second liability notice was not invalid; it was not required to include reasons for withdrawing relief (DL10, DL11).

The Council issued a demand notice on 5 August 2019, stating a deemed commencement date of 19 June 2019, and gave the following reasons (1) development is deemed to have commenced; (2) a surcharge has been imposed; (3) a disqualifying event for relief purposes has occurred. At DL8, the Inspector said:

The Council did not act beyond its powers in issuing a second demand notice on 11 February 2020, which omitted the reference to a disqualifying event, and imposed surcharges. It was entitled to issue the second demand notice under regulation 69(3), and the first demand notice then ceased to have effect (DL9).

The amendments to the CIL Regulations which came into force on 1 September 2019, and omitted sub-paragraph (a) of regulation 51(7), did not apply retrospectively in relation to a liability notice issued before 1 September 2019, as in this case (DL13).

At DL16 - DL20, the Inspector held:

CIL is a levy provided for by section 205 of the Planning Act 2008 (“PA 2008”). Subsection 205(2) identifies the purpose of the levy as seeking to ensure that the costs incurred by public authorities in supporting the development of an area can be funded wholly or in part by the owners or developers of land, but without rendering development of the area unviable. Some provision relating to the detail of the levy is made in Part 11 PA 2008. Section 221 PA 2008 empowers the Defendant to give guidance on any matter connected with CIL, and regard must be had to such guidance.

The CIL Regulations were made pursuant to the provisions set out in section 205 PA 2008. The CIL Regulations were amended in 2019 by the Community Infrastructure Levy (Amendment) (England) (No.2) Regulations SI 2019/1103 (“the Amendment Regulations”). Sub-paragraph (a) of regulation 51(7) of the CIL Regulations, which is central to this case, was revoked, but, as the Inspector held, the amendment only applies in cases where the liability notice was issued by a collecting authority on or after 1 September 2019. The liability notice in this case was issued before 1 September 2019. The Claimant did not challenge the Inspector’s conclusion on this point before me.

Interpretation provisions are set out in regulation 2 and include the following:

CIL is payable in respect of “chargeable developments”. By regulation 9, a chargeable development is one for which planning permission has been granted.

Regulation 7(2) provides:

Section 208(1) PA 2008 provides that, where liability to CIL would arise in respect of proposed development, a person may assume liability to pay the levy. Section 208(3) PA 2008 provides:

By regulation 31 of the CIL Regulations, a person who wishes to assume liability to pay CIL in respect of a chargeable development must submit an assumption of liability notice to the collecting authority.

Regulation 31(3) sets out the point at which liability arises:

Regulations 70 and 71 of the CIL Regulations prescribe when a CIL payment is due.

Regulation 70(1) and (2) provide:

Paragraphs (3) to (6) of Regulation 70 make provision for payment in accordance with instalment policies. Paragraph (7) and (8) provide:

Regulation 71 sets out the circumstances in which the amount of CIL is payable in full on the commencement date (only paragraph (2) is relevant to this claim):

The amount of CIL payable in respect of a chargeable development (D) is due in full on the intended commencement date if:

Where the collecting authority determines a deemed commencement for a chargeable development, the amount of CIL payable in respect of that chargeable development is due in full on the deemed commencement date.”

Part 6 of the CIL Regulations sets out exemptions and relief from liability to pay CIL. They include inter alia exemptions for minor development (regulation 42); residential annexes or extensions (regulations 42A, 42B and 42C); charities (regulations 43 to 48); and self-build housing (regulations 54A and 54B).

Provision is made for social housing relief in regulations 49 to 54. Regulation 49 provides that chargeable development which comprises in whole or in part of qualifying dwellings (as defined by regulation 49) is eligible for relief from liability to CIL. In this case the proposed dwellings qualified under Condition 5.

The amount of social housing relief is calculated in accordance with regulation 50 and is referred to as the qualifying amount. Social housing relief is given by deducting the qualifying amount from what would otherwise be the amount of liability to pay CIL that would arise in respect of the chargeable development (regulation 49(10)).

Regulation 51 sets out the procedure for claiming social housing relief, as follows:

Regulation 53 provides for the withdrawal of social housing relief where a dwelling or development ceases to qualify. It states:

Part 8 makes provision for the administration of CIL.

Regulation 65 requires the collecting authority to issue and serve a liability notice in respect of each chargeable development, as soon as practicable after the first day on which planning permission permits development. It provides as follows:

The collecting authority must issue a liability notice as soon as practicable after the day on which a planning permission first permits development.

Once the liability notice has been issued, any person intending to commence work on a chargeable development must submit a commencement notice to the charging authority before development commences. Regulation 67 provides as follows:

By regulation 68, if a collecting authority has not received a commencement notice, it must determine a deemed commencement date:

Following receipt of a commencement notice, or a decision to determine a deemed commencement date, the collecting authority must serve a demand notice on each person liable to pay an amount of CIL in respect of a chargeable development, requiring payment by the specified date. Regulation 69 provides as follows:

The collecting authority must serve a demand notice on each person liable to pay an amount of CIL in respect of a chargeable development.

A demand notice must -

Part 9 of the CIL Regulations makes provision for enforcement.

By regulation 83, where a chargeable development is commenced before the collecting authority has received a valid commencement notice in respect of the chargeable development, the collecting authority may impose a surcharge equal to 20 per cent of the chargeable amount payable or £2500, whichever is the lower amount.

Pursuant to regulation 85(1), where a person is liable to pay an amount under the CIL Regulations and payment is not received in full after the end of the period of 30 days beginning with the day on which payment of the amount is due, the collecting authority may impose a surcharge for late payment equal to five per cent of the amount or £200, whichever is the greater amount.

Pursuant to regulation 85(2), if any part of the amount is not received after the end of the period of six months beginning with the day on which payment is due, the collecting authority may impose a further surcharge for late payment equal to five per cent of the unpaid amount or £200, whichever is the greater amount.

Under regulation 87, interest is payable if payment is not made on the day it is due.

Regulation 88 provides that where surcharge or interest is imposed on a person, it must be collected by treating it as part of the CIL which that person is liable to pay.

The Claimant appealed to the Defendant under section 218 PA 2008 and regulation 117(a), (b) and (c). Regulation 117 provides:

The Claimant did not appeal under regulation 118, which provides a right of appeal against a deemed commencement date on the ground that it has been incorrectly determined.

I have carefully considered all the authorities on statutory interpretation relied upon by the parties.

It was common ground between the parties that: “a citizen cannot be taxed unless he is designated in clear terms by a taxing Act as a taxpayer and the amount of this liability is clearly defined” and that “when Parliament imposes a tax, it is the duty of the commissioners to assess and levy it upon and from those who are liable by law”, not by “self-asserted administrative discretion” (Vestey v IRC[1980] AC 1148, per Lord Wilberforce at 1172E, 1173A-C, applied to the CIL Regulations in R(Orbital) v Swindon BC [2016] PTSR 736, per Patterson J. at [69]).

The Claimant referred to the case of Commissioners for Her Majesty’s Revenue and Customs v IDT CardServices Limited[2006] EWCA Civ 29, which concerned the implementation of the EU VAT Directive (77/338/EC) into domestic law. Arden LJ said, at [110], “I accept that under the principle of legal certainty, the person affected by legislation must be able to foresee the manner in which it is to be applied and I would also accept that must particularly be so where the legislation has financial consequences for him…..”.

A purposive construction is to be applied to taxing legislation. In Rossendale BC v Hurstwood Properties (A) Ltd[2021] 2 WLR 1125, Lord Briggs and Lord Leggatt summarised the approach to be taken, as follows:

In R (Fylde Coast Farms Ltd) v Fylde Borough Council[2021] 1 WLR 2794; [2021] UKSC 18 Lords Briggs and Sales summarised the proper approach to statutory interpretation at [6]. This requires the particular provision to be set in its context as part of the relevant statutory framework, to have due regard to the historical context in which the relevant enactment came to be made, and to arrive at an interpretation which serves, rather than frustrates, the purpose of the particular provision.

These principles have been applied in the CIL sphere. See:

LB Lambeth v Secretary of State for Housing, Communities and Local Government & Anor [2021] PTSR 1606; [2021] EWHC 1459 (Admin), per Thornton J. at [62] and [70];

In Orbital, Patterson J. said, at [75]:

In R (Hourhope Ltd) v Shropshire Council [2015] EWHC 518 (Admin), Judge David Cooke, sitting as a High Court Judge, summarised the test to be applied as follows:

In arriving at the correct interpretation, the format and layout of the text forms part of the legislation and may be used in construing any provision: see Bennion, Bailey and Norbury on Statutory Interpretation at [16.6]; Lowe and Potter, Understanding Legislation: A Practical Guide to Statutory Interpretation (2018) at [6.13] where it is said that it is relevant to “consider legislation’s structure, format and punctuation as internal aids to construction”.

There are two main categories of extrinsic material relied on in this case: guidance and explanatory memoranda.

Official statements by government departments administering legislation may be taken into account as persuasive authority on the legal meaning of its provisions. In Chief Constable of Cumbria v Wright[2007] 1 WLR 1407, Lloyd Jones J said, at [17]:

The Defendant submitted that background material could be a useful tool in assisting to identify the purpose of a provision and as an admissible aid to construction, particularly to understand the general context of a provision and the mischief at which it is aimed.

Both parties cited the judgment of Lord Steyn in R (Westminster City Council) v National Asylum Service[2002] 1 WLR 2956, at [5]-[6]:

The Claimant submitted that the Inspector erred in concluding that the Claimant lost the benefit of social housing relief by operation of regulation 51(7)(a) of the CIL Regulations, which provides that a chargeable development ceases to be eligible for social housing relief if a commencement notice is not sent to the collecting authority before the development commences.

The Claimant accepted that it did not send a commencement notice before the development commenced, in breach of regulation 67(1). However, on a proper interpretation, regulation 51(7)(a) only applied prior to the making of the Council’s decision on the Claimant’s application for relief, under regulation 51(5). Once the Council decided to grant the Claimant social housing relief, by operation of regulation 51(6), the Claimant was deemed to benefit from an amount of relief equal to the qualifying amount. Thereafter, social housing relief could only be withdrawn by the Council if a disqualifying event occurred, pursuant to regulation 53.

In response, the Defendant submitted that the Inspector’s understanding of regulation 51(7)(a) of the CIL Regulations was correct. Its operation is not confined to the period before a decision is made on the claim for social housing relief, as it expressly states that it applies “before chargeable development commences”. The purpose of the deeming provision in regulation 51(6) is merely to ensure that the amount of relief is equal to the qualifying amount, as defined in regulation 50, and to ascribe the benefit of that relief to the applicant. The disqualification provisions in regulation 53 have a different purpose, namely, to remove the benefit of social housing relief where the properties no longer meet the requirements for relief, and to require repayment (by way of further charges), at any time before the end of the clawback period of 7 years.

Section 205(2) PA 2008 identifies the purpose of the CIL as seeking to ensure that the costs incurred by public authorities in supporting the development of an area can be funded wholly or in part by the owners or developers of land, but without rendering development of the area unviable. Sections 205 to 223 PA 2008 set out a broad framework for the CIL scheme, which is implemented in detail by the CIL Regulations.

According to Patterson J. in Orbital, the purpose of the CIL Regulations is “to give certainty to developers and the local planning authority as to when and how the liability for CIL will arise” (at [62]). The general purpose behind the requirement to submit a commencement notice is a need for clarity for the collecting authority as to when chargeable development has commenced and liability to pay CIL is triggered. From the relevant background materials, it is evident that regulation 51(7)(a) was included to further this purpose, and also so that the collecting authority could accurately calculate the ‘clawback’ under regulation 53.

Regulation 51(7) of the CIL Regulations specifies the circumstances in which “a chargeable development ceases to be eligible for social housing relief”. They are:

a commencement notice is not submitted to the collecting authority;

the claimant’s assumption of liability is withdrawn or otherwise ceases to have effect; or

the claimant transfers liability to another person in accordance with regulation 32.

Regulation 49(1) of the CIL Regulations provides:

The term “eligible” is not defined in the CIL Regulations. The Claimant referred me to a definition of “eligible” in the Shorter Oxford English Dictionary as meaning “fit or entitled to be chosen for a position”. The Defendant referred me to the definition of “eligible”, adopted in the case law summarised in ‘Words & Phrases Legally Defined’, as meaning “qualified”. In my view, the precise meaning of “eligible” will depend upon the context in which it is used. In regulation 49, I consider that its meaning is that the chargeable development fulfils the conditions for relief from liability to CIL.

Applying the same meaning of “eligible” to regulation 51(7)(a), I consider its meaning is that the chargeable development ceases to fulfil the conditions for relief from liability to CIL, where a commencement notice is not submitted to the collecting authority.

If the development is eligible for social housing relief under regulation 49, that relief can be claimed and granted, subject to meeting the requirements in regulation 51.

To claim social housing relief, the claimant must (a) assume liability to pay CIL in respect of the chargeable development for which relief is claimed; and (b) be an owner of the relevant land: see regulation 51(2).

Regulation 51(4) provides that “a claim for social housing relief will lapse where the chargeable development to which the claim relates is commenced before the collecting authority has notified the claimant of its decision on the claim”.

Regulation 51(5) makes provision for the collecting authority to notify the claimant in writing of its decision on the claim “as soon as practicable” after receiving a claim.

Regulation 51(6) provides:

The Claimant submits that, once the deeming provision in regulation 51(6) is triggered, the relief granted cannot be removed other than by withdrawal of relief, following a disqualifying event, pursuant to regulation 53. On a proper interpretation, regulation 51(7) can only operate prior to the grant of social housing relief.

In my judgment, the Claimant’s interpretation is mistaken. There is nothing in the wording of regulation 51(7)(a) which limits its operation to the period prior to the grant of social housing relief. It expressly includes the period before chargeable development commences. Submission of a commencement notice may take place at any time up to the day before the commencement of development (regulation 67(1)). In practice, it is likely to occur after the grant of social housing relief. Similarly, the circumstances set out in sub-paragraphs 51(b) and (c) are not expressly limited to the period prior to the grant of relief, and by their nature, they may well occur after the grant of relief, but before the commencement of chargeable development.

The Claimant’s interpretation renders regulation 51(7)(a) otiose. The period prior to grant is already addressed by regulation 51(4), which provides that a claim for social housing relief will lapse (whether or not a commencement notice is submitted) where the chargeable development to which the claim relates is commenced before the collecting authority has notified the claimant of its decision on the claim. The Claimant’s interpretation of regulation 51(7)(a) would add nothing to this and would render the provision superfluous.

The Claimant’s interpretation is also contrary to the logical structure of regulation 51 which begins with the making of the claim, then provides for the grant of relief by the collecting authority (regulation 51(5)), and the deeming provision after the grant (regulation 51(6)). If regulation 51(7) had the limited function for which the Claimant contends, it would have been placed alongside regulation 51(4) and before regulations 51(5) and (6). Thus, the structure of the regulation supports the interpretation of regulation 51(7) as applying after the grant of relief to a claimant.

I consider that the Claimant has misunderstood the purpose and effect of regulation 51(6). By regulation 49, the chargeable development, not the claimant, is eligible for relief. Regulation 50(1) provides that “the amount of social housing relief for which a chargeable development is eligible (“the qualifying amount”) must be calculated in accordance with this regulation”. The purpose of regulation 51(6) is merely to enable the individual claimant to benefit from the relief which has been granted to the chargeable development under regulations 49 and 50. To interpret the deeming provision as creating a personal benefit for a claimant which cannot be lost under any of the circumstances set out in regulation 51(7) is to stretch it far beyond its purpose. Generally, the intention of a deeming provision, in laying down a hypothesis, is that the hypothesis shall be carried as far as necessary to achieve the legislative purpose, but no further (see Bennion at [17.8], in a section which has been judicially approved).

The purpose and mode of operation of regulation 53 is very different from the purpose and mode of operation of regulation 51(7). Regulation 53 effectively removes the benefit of social housing relief for parts of the development which no longer meet the requirements to qualify as social housing. This can happen at any time before the end of the clawback period of seven years from the commencement of development or, for qualifying dwellings, from the date on which the qualifying dwelling is first let. Regulation 53 operates by creating a new additional liability to pay an amount of CIL known as the “withdrawn amount”, related to the particular portion of the development which no longer qualifies for social housing relief. Regulation 53 does not retrospectively withdraw or alter social housing relief which had previously been granted or included within a liability or demand notice. It creates an additional liability to pay the “withdrawn amount”.

It cannot sensibly be said that regulation 53 fulfils the function of regulation 51(7) or occupies the whole ground in terms of when social housing relief could be lost. The cessation of eligibility under regulation 51(7) is a one-off event applying to the entire chargeable development which has the effect of entirely removing a development’s eligibility for social housing relief and rendering lost any such relief previously granted.

Moreover, the Defendant’s interpretation of regulation 51(7) is broadly consistent with the statutory scheme for other exemptions and reliefs in the CIL Regulations, whereas the Claimant’s interpretation is not.

Part 6 of the CIL Regulations, is headed “Exemptions and Relief”, and it makes provision for each type of exemption or relief in turn. Regulation 2 defines “relief” widely so as to include exemptions for residential annexes or extensions and self-build housing, as well as charitable relief, social housing relief and relief for exceptional circumstances, and so the difference in wording between “exemption” and “relief” does not appear to be significant.

Regulation 42A provides an exemption from CIL liability for residential annexes or extensions. Regulation 42B sets out the procedure to be followed, and paragraph (6) provides for loss of the exemption if a commencement notice is not submitted before chargeable development commences:

Regulation 42C provides for withdrawal of the exemption if a disqualifying event occurs.

Regulation 43 provides an exemption from CIL liability for charities. Regulation 47 sets out the procedure to be followed, and paragraph (7) provides for the loss of the exemption if a commencement notice is not submitted before chargeable development commences:

Regulation 48 provides for withdrawal of charitable relief if a disqualifying event occurs.

Regulation 54A provides an exemption from CIL liability for self-build housing. Regulation 54B sets out the procedure to be followed, and paragraph (6) provides for the loss of the exemption if a commencement notice is not submitted before chargeable development commences:

Regulation 54D provides for withdrawal of self-build housing relief if a disqualifying event occurs.

The Claimant concedes that each of these provisions for the cessation of eligibility following failure to submit a commencement notice did apply after the grant of the relevant exemption and resulted in the loss of the exemption from liability. However, the Claimant seeks to distinguish these provisions from regulation 51(7) on the basis that each begins with the words “A person who is granted ….” whereas regulation 51(7) begins “A chargeable development ….”, and they do not have an equivalent provision to regulation 51(6).

I accept the Defendant’s submission that these distinctions between the different types of exemptions are insignificant in comparison to the striking similarities between each statutory scheme. There is no need for an equivalent of the regulation 51(6) deeming provision in relation to other exemptions/reliefs in the CIL Regulations because the eligibility for them arises from a person’s characteristics (e.g. householder, charity or self-builder) and the exemption/relief is therefore related to that person. Regulations 42A(1), 43(1), 44(1) and 54A(1) provide that a person/owner is exempt from liability to pay CIL or that a person/owner is eligible for an exemption or relief from liability to pay CIL. By contrast, for social housing relief under regulation 49(1), eligibility is founded upon the characteristics of the type of development. The purpose of the deeming provision is simply to ascribe the benefit of the amount of relief to the claimant.

The Claimant submitted for the first time in its skeleton argument that the state aid provisions resulted in a difference in the drafting of the provisions for social housing relief and other types of relief in the CIL Regulations. The CIL ‘Information document’, dated May 2011, contained a chapter on state aid, and explained at paragraph 91 that all relief from the levy must be given in accordance with state aid rules. Social housing relief came within the scope of the EU Block Exemption for Services of a General Economic Interest, and had been designed to comply with its requirements (paragraph 63). Other exemptions could fall within the de minimis Block Exemption. However, the Claimant was unable to identify any way in which these distinctions supported its restrictive interpretation of regulation 51(7)(a), so as to prevent it from operating after the grant of relief. Therefore the submissions on state aid did not assist its case.

The Defendant’s interpretation of regulation 51(7)(a) is also consistent with case law on the operation of regulation 54B(6) concerning the self-build housing exemption.

In Gardiner v Hertsmere BC [2021] EWHC 1875 (Admin), Thornton J. observed, at [63], that a failure to submit a commencement notice before the commencement of the chargeable development resulted in the loss of the exemption.

In R (Shropshire Council) v Secretary of State for Communities and Local Government & Anor[2019] EWHC 16 (Admin), Mr C. M. G. Ockleton sitting as a High Court Judge, stated at [40]:

In R (Trent) v Hertsmere Borough Council [2021] EWHC 907 (Admin), it was common ground between the parties (the claimant appearing in person) that, under regulation 54B(6) of the CIL Regulations, a person who has been granted an exemption ceased to be eligible for that exemption if a commencement notice was not submitted before chargeable development commenced.

The origins of regulation 51(7) and other similar regulations including regulation 47(7) may be traced back to the draft regulations (Footnote: ²) published for consultation in July 2009. The procedure for claiming a relief was set out in draft regulations 21 and 22. Draft regulation 22(1) provided:

This provision was explained in the accompanying consultation document (Footnote: ³) as follows (emphasis added):

Whilst the document refers to, and the draft regulations concerned, relief for charities, the consultation document also consulted on the prospect of introducing a separate relief for an affordable housing discount which was then introduced as part of the CIL Regulations as social housing relief. As the Explanatory Memorandum to the CIL Regulations explains:

The Information Document published in May 2011 gave the following guidance in respect of regulation 51(7)(a) (emphasis added):

Paragraph 36 of the Information Document explains the operation of regulation 47(7) concerning charitable relief in essentially the same terms:

The Information Document does not draw any distinction between the effect of regulation 47(7) and 51(7)(a).

Similarly, the 2014 version (Footnote: ⁴) of the Planning Practice Guidance (“PPG”) provided, at [124]:

The explanation of the draft regulations concerning charitable relief in the consultation documents is consistent with the 2011 Information Document and the 2014/2015 PPG in respect of social housing relief and shows that the purpose of regulation 51(7) was to ensure no social housing relief was provided where no commencement notice was submitted prior to the commencement of development. From the relevant background materials, it is evident that the reason this provision was included was because of a need for clarity for the collecting authority as to when the development commenced and liability to pay CIL is triggered (Footnote: ⁵), and also when calculating the ‘clawback’ period which applies to disqualifying events, for example, under regulation 53 discussed further below. The purpose of regulation 51(7) and the intended consequence of a failure to submit a commencement notice was that the benefit of the relief would be lost and the full CIL liability, plus any surcharge, became payable immediately.

In 2019, regulation 51(7)(a) was revoked by the Amendment Regulations, together with the comparable provisions for other exemptions and relief, which I have referred to above. The Secretary of State’s explanation in 2019 of the scope of these provisions is, in my view, a legitimate aid to their interpretation, even though it was provided some years after they were made in 2010.

The Explanatory Note to the Amendment Regulations explains that regulation 6 provides for the removal of the provisions which resulted in relief being lost if a commencement notice was not submitted before commencing the development.

The Explanatory Memorandum to the Amendment Regulations provides at paragraphs 7.7 and 7.8 that:

The use of the words “in most cases” in paragraph 7.7, relied on by the Claimant, is simply a reflection of the fact that not all exemptions or reliefs in the CIL Regulations required a commencement notice prior to the commencement of development so as not to lose the exemption e.g. the exemption for minor development under regulation 42 and the discretionary relief for exceptional circumstances under regulation 55.

The Annex to the Memorandum explains the changes in relation to regulation 51 as follows (emphasis added):

In my view, this extrinsic material supports the Defendant’s interpretation of regulation 51(7)(a).

In my judgment, the Defendant’s interpretation of regulation 51(7)(a) is correct. A chargeable development ceases to be eligible for social housing relief if, before the chargeable development is commenced, a commencement notice is not submitted to the collecting authority. This interpretation does not depend on reading any words into regulation 51(7). This is the ordinary meaning and effect of the words used in regulation 51(7), read in their statutory context. The Court should interpret the language used in regulation 51(7) so as to give effect to the purpose of the provision. The purpose of the CIL Regulations is to give certainty to developers and the collecting authority as to when and how the liability for CIL will arise. The general purpose behind the requirement to submit a commencement notice is a need for clarity for the collecting authority as to when chargeable development has commenced and liability to pay CIL is triggered. From the relevant background materials, it is evident that regulation 51(7)(a) was included to further this purpose, and also so that the collecting authority could accurately calculate the ‘clawback’ under regulation 53. In my judgment, the effect of regulation 51(7)(a) is clear for both the collecting authority and the developer. Additionally, the pro forma forms issued by the Council in this case repeatedly advised the Claimant of the requirement to submit a commencement notice in time, and warned of the loss of relief if it failed to do so. Therefore Ground 1 does not succeed.

The Claimant submitted that the Council erred in issuing surcharges for late payment in the demand notice dated 11 February 2020, as payment was not due until after that demand notice had been served on the Claimant, and the grace periods for payment (30 days and 6 months), before any surcharge could be triggered under regulation 85, ran from 11 February 2020, and so had not expired.

The Inspector erred in concluding that payment was due in full on 19 June 2019, which was the date on which development was deemed to have commenced. Furthermore, regulation 70 of the CIL Regulations, referred to by the Inspector, made no provision for a deemed commencement date. Time for payment could only run from the date of service of a valid demand notice, pursuant to regulation 69, after a valid liability notice had been served. The demand notice issued on 5 August 2019 was invalid because it erroneously stated that a “disqualifying event for relief purposes has occurred”, implying that regulation 53 was engaged.

In response, the Defendant accepted that the Inspector erred in referring to regulation 70 of the CIL Regulations, when the relevant provision was regulation 71(2). However, his reasoning was correct, and there was no error of law. Regulation 71(2) provides that, where the collecting authority determines a deemed commencement for chargeable development, the amount of CIL payable is due in full on the deemed commencement date.

The Council had to determine a deemed commencement date of 19 June 2019 because the Claimant failed to notify it of the actual commencement date. The Claimant never challenged the deemed date of 19 June 2019. Accordingly, the deemed commencement date was the date upon which payment became due, not the date on which the demand notice was issued.

The demand notice issued on 5 August 2019 was not invalidated by the inapt use of the term “disqualification”, to describe the loss of the social housing relief under regulation 51(7). In any event the Claimant never challenged the validity of that demand notice, either by an appeal or a judicial review claim, and it remained in force until replaced by the demand notice issued on 11 February 2020, which was updated to include the late payment surcharges and interest payments which had accrued under regulation 85.

Liability to pay CIL arises upon the commencement of the chargeable development. Section 208(1) PA 2008 provides that, where liability to CIL would arise in respect of proposed development, a person may assume liability to pay the levy. Section 208(3) PA 2008 provides:

By regulation 31 of the CIL Regulations, a person who wishes to assume liability to pay CIL in respect of a chargeable development must submit an assumption of liability notice to the collecting authority.

Regulation 31(3) sets out the point at which liability arises:

The date upon which payment of CIL is due is prescribed by regulations 70 and 71 of the CIL Regulations.

Regulation 70 applies where a person has assumed liability to pay CIL in respect of a chargeable development and submitted a commencement notice (paragraph (1)). Paragraphs (3) to (6) make provision for payment by instalments. Paragraph (7) is the default position and states:

Paragraph (8) provides:

Regulation 71 applies where the conditions in regulation 70(1) have not been met, and so payment in full has to be made at the date of intended or deemed commencement. The material provision in this claim is paragraph (2):

When these provisions are read together with regulation 69(2)(e), it is clear that the demand notice must state the date on which payment of CIL is due, but it does not set that date. The date is set by operation of regulations 70 and 71, and then stated in the demand notice.

In Lambeth v Secretary of State for Housing Communities and Local Government & Anor, Thornton J. rejected an argument similar to that relied upon by the Claimant before me. She correctly concluded, at [75]:

The Claimant cited the case of R (Trent) v Hertsmere Borough Council [2021] EWHC 907 (Admin) in which I held at [57]:

However, the Claimant’s submission in this claim, namely, that the date of payment was set by the demand notice rather than by regulation 71(2), was not raised in Trent. The issue in Trent was the failure to issue a valid liability notice. Therefore, paragraph 57 in Trent was not authority for the Claimant’s submission.

In my judgment, the Council correctly applied the relevant provisions in the CIL Regulations to this claim.

The first Liability Notice, issued on 14 May 2019, stated:

It appears that this was intended to reflect the default payment date under regulation 70(7) of the CIL Regulations, and that the Council was working on the assumption that the Claimant would submit a commencement notice prior to the commencement of the chargeable development.

However, after the Site visit on 19 June 2019, the Council realised that the Claimant had failed to submit a commencement notice prior to the commencement of the chargeable development. By regulation 68 of the CIL Regulations, it was required to determine a deemed commencement date.

On 5 August 2019, the Council issued a revised Liability Notice (LN00000877) to the Claimant, which stated that the amount of relief awarded was nil, and that the Claimant was now liable to pay an increased charge, assessed at £1,451,899.58. It gave revised information to the Claimant, confirming that the payment date was reduced from 60 days to zero days:

On 5 August 2019, the Council also issued a Demand Notice (LN00000877), pursuant to regulation 69 of the CIL Regulations. It identified the date of deemed commencement of development as 19 June 2019. It stated that the outstanding amount of CIL payable (£1,451.899.58) was “due for payment immediately (except if there is an appeal) and is subject to interest being added” and surcharges being applied.

The Claimant did not seek a review of, or an appeal against, the Liability Notice or the Demand Notice.

The two Notices served on 5 August 2019 stated the result of the Council’s application of regulation 71(2) of the CIL Regulations, under which the amount of CIL payable became due in full at the deemed commencement date of 19 June 2019. Essentially, by failing to comply with the requirement to submit a commencement notice, the Claimant had forfeited the benefit of the more favourable payment provisions in regulation 70. It is important to bear in mind that the Claimant’s liability to pay arose upon the commencement of chargeable development, under regulation 31(3).

On 11 February 2020, the Council issued a revised Demand Notice which re-stated the deemed commencement date of 19 June 2019 and applied surcharges for late payment and interest to the Claimant’s unpaid liability for CIL. Under regulation 85(1) of the CIL Regulations, liability to pay a surcharge arose by reason of the non-payment of the CIL in full “after the end of the period of 30 days beginning with the day on which payment …. is due”. Under paragraph (2), liability to pay a further surcharge arose by reason of the non-payment of the CIL in full “after the end of the period of 6 months beginning with the day on which payment …. is due”. I have already found that, by operation of regulations 31(3) and 71(2), the date on which payment was due was 19 June 2019.

The Claimant submitted that the periods of time specified in regulation 85 of the CIL Regulations ran from the issue of the Demand Notice on 11 February 2020, because time only ran from the date on which a valid demand notice was issued. The Demand Notice issued on 5 August 2019 was invalid because its reasons stated:

It was common ground before me, and before the Inspector, that the reference to a disqualifying event was incorrect as it implied that regulation 53 was engaged, whereas social housing relief had been lost by application of regulation 51(7)(a), as the Council explained in its email of 9 August 2019. It appears that the error arose because the decision template which the Council had to complete did not include an appropriate option. Nonetheless, the Council was required “to include the other information specified in the form” (regulation 69(2)(g)), and I consider that the inaccuracy in the reasons was more than trivial; it was potentially misleading.

However, in law, the Demand Notice of 5 August 2019 was valid until struck down either in a statutory appeal, or in a claim for judicial review (De Smith’s JudicialReview (8^th ed), at paragraph 5-058). The Claimant did not challenge the validity of this Demand Notice prior to this claim for judicial review. By then it had already been superseded by the Demand Notice issued on 11 February 2020, which did not include the incorrect reference to a disqualifying event (regulation 69(5)). Therefore the error in the Demand Notice issued on 5 August 2019 does not assist the Claimant in its challenge to the surcharges.

The Claimant submitted that the Inspector erred in law by referring to regulation 70 of the CIL Regulations, instead of regulation 71(2), at DL17. In my judgment, this was merely an inadvertent slip by the Inspector and did not invalidate his reasoning on this issue, which was otherwise entirely sound.

For the reasons set out above, Ground 2 does not succeed.

For the reasons given in this judgment, the claim for judicial review is dismissed.