Council wins High Court battle over CIL late payment surcharge

The London Borough of Lambeth has won a High Court case over the validity of notices to developers to pay the community infrastructure levy (CIL) after a judge dismissed a developer’s “circular” argument.

In London Borough of Lambeth v Secretary of State for Housing Communities and Local Government [2021] EWHC 1459 (Admin) Mrs Justice Thornton ruled that a planning inspector appointed by the Secretary of State for Housing Communities and Local Government had erred in finding that Lambeth had no authority to impose a charge on developer Thornton Park (London).

CIL is provided for by section 205 of the Planning Act 2008 and the Community Infrastructure Levy Regulations 2010 to ensure that the costs incurred by public authorities in supporting development can be funded wholly or in part by the owners or developers of land.

Lambeth argued that liability for a late payment surcharge for unpaid CIL is not contingent on the service of a liability or demand notice; and the issue/service of a revised liability and/or demand notice does not extinguish liability for a late payment surcharge which has already been incurred.

Although the Secretary of State agreed with this and conceded the claim, Thornton Park (London) as an interested party did not.

It argued that the issue of a revised demand notice meant that any previously served demand notices ceased to have effect and so a surcharge for late payment can only be imposed 30 days after service of the revised notice,

Lambeth had given Thornton Park (London) planning permission and served a CIL demand notice for £5,549,963.41.

This was not paid but Lambeth later granted Thornton Park (London)’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 include late payment surcharges from the original sum.

Thornton Park (London) successfully appealed to the inspector by arguing that the breach which lead to the imposition of the surcharge had not occurred.

Thornton J dismissed its argument. She said: “It is no longer appropriate to adopt a literal approach to the construction of revenue statutes.

“The modern approach is to have regard to the purpose of a particular provision and interpret its language, so far as possible, in the way which best gives effect to that purpose.”

She said liability to pay CIL arose at the start of development and a revised liability or demand notice “may reflect and record a change to the quantum of liability and/or payment dates but it does not itself change the genesis or origin of the liability” .

Thornton J said the company’s argument was circular as “under its interpretation, the date when payment is due is determined by service of a demand notice.

“However, since a revised demand notice is required to be issued in response to the imposition of a late payment surcharge…each new demand notice would reset the due date so that the power to impose late payment surcharges…could never arise and is rendered meaningless.”

She said it could not have been the intention of the regulations that past failures to pay CIL could be expunged merely because some event had required a revised demand notice.

“This would provide developers with a perverse method of avoiding late payment surcharges.,” the judge concluded.

Mark Smulian