In the recent case of R (Orbital Shopping Park Swindon Ltd) v Swindon Borough Council the High Court has ruled that the demand for CIL payments by Swindon Borough Council for the Claimant's installation of a mezzanine floor was unlawful. The Court held that the works fell within an exemption in the CIL Regulations which provides that applications that affect only the interior of the building are not liable for CIL. Further, the Council were not entitled to link the mezzanine floor application to a separate external works application also submitted by the Claimant.
The High Court Judgment of Mrs Justice Patterson explained that the Claimant, Orbital Shopping Park Swindon Limited, owns the unit forming part of the Orbital Shopping Centre in Haydon Wick, Swindon. The unit is occupied by the interested party, Next PLC.
In January 2015 the Claimant submitted two separate planning applications to the Defendant, Swindon Borough Council ("the Council"): one for the installation of a mezzanine floor at the Next store; and the other for external works to that unit. The mezzanine floor application would result in a net increase in floor space of 1,709 square metres, whereas the external alterations application would not create any additional floor space.
Under an exemption contained in Regulation 6(1)(c) of the CIL Regulations 2010, applications for the carrying out of works which affect only the interior of a building are not to be treated as development for the purposes of CIL and are thus not CIL liable.
Both the applications were granted planning permission by the Council on 5 June 2015. With the grant of the mezzanine floor permission, the Council informed the Claimant that this installation constituted development liable for CIL.
The Claimant implemented the two planning permissions in July 2015. The Council subsequently issued a CIL Liability Notice and a Demand Notice to the Claimant in August 2015.
The Claimant challenged the Council's power to issue the notices arguing that, pursuant to the regulation 6 exemption, the works to which the notices related were not development for the purposes of CIL.
The Council justified its decision saying it was entitled to treat both applications as one on the basis that the works were carried out simultaneously and affected both the exterior and interior of the unit. If the works comprised in both applications had been contained in a single application, subject to the grant of permission, those works would have been subject to CIL. The Judgment also stated that the Claimant's planning consultant had explained in his witness statement that the strategy to submit two applications was a deliberate calculation so as to avoid CIL. The Council asserted that, in effect, this was one development split into two applications.
Mrs Justice Patterson rejected the Council's arguments holding that there was nothing on the face of the mezzanine planning permission to connect it with the planning permission for external operations. Given each permission was entered individually on the planning register (in accordance with the Council's duty to maintain a register of the planning applications) there was nothing on the public record to suggest that they should be linked.
The Judgment went on to say that:
"The real world, as drafted in the regulations for CIL before the court, permits the claimant to act as it did."
"There is, therefore, no manipulation of the system for any ulterior and/or illegal motive in accordance with the submissions of the defendant. Rather, the claimant has taken advantage of the legislative scheme which permits it to submit, in this case, two separate planning applications for each act of operational development that it wished to pursue."
The case highlights the importance of a thorough consideration of an applicant's CIL liability prior to the submission of a planning application. Here, the applicant's agent recognised the importance of splitting the works into two separate planning applications and in doing so, avoided the payment of CIL.
There are many other circumstances where the payment of CIL can be avoided altogether or the payments can be delayed, thereby assisting with cash flow for a developer. The Court has confirmed that such avoidance, provided it is within the legislative framework, is justified and is a tool available to developers.
The CIL regime is currently the subject of a review and it will be of interest to developers and local authorities alike whether this case results in any further changes to the CIL Regulation.
Click here to read the full Judgment.