Payment in kind and land payments under the levy

CIL payment in kind is possible, rarely used, and useful in a narrow set of circumstances. The Community Infrastructure Levy Regulations 2010 allow a charging authority to accept land, or the provision of infrastructure, in satisfaction of all or part of a levy liability. Both routes depend on the authority having decided in advance that it will accept them, and on a written agreement completed before development starts.

The attraction is obvious on a cash constrained scheme: you hand over land you were going to transfer anyway, or build infrastructure you were going to build anyway, and reduce a cash demand that falls due at the worst point in the cash flow. The difficulty is that the regulations are tightly drawn and the valuation is where the value leaks away.

What the regulations permit

Two separate mechanisms sit in the regulations.

A land payment under regulation 73 allows the charging authority to accept the transfer of land in satisfaction of levy liability. The authority must have given notice of its intention to accept land payments, the person making the payment must have assumed liability, a liability notice must have been issued, and the value of the land must be determined by a suitably qualified independent person.

An infrastructure payment allows the authority to accept the provision of infrastructure instead of cash. It was added by amendment and carries its own conditions: the authority must have published a policy stating it will accept infrastructure payments, the infrastructure must fall within the definition of relevant infrastructure, and it cannot be infrastructure already secured through a planning obligation.

The last row matters because it is where most practitioners should start. If the authority wants a site or a facility and it is necessary to make the development acceptable, a planning obligation under section 106 is usually the straightforward route, and our note on section 278, section 38 and section 106: which secures what sets out the division. The in kind levy routes exist for the cases where the obligation tests are not met but the authority still wants the asset.

Land payments and how they are valued

Valuation is the whole game. The credit against your liability is the value of the land as determined by a suitably qualified independent valuer, not the value you ascribe to it in your appraisal and not the price you paid.

Three features of that process are worth understanding before you propose a land payment.

The valuation is of the land in the state and with the planning status it has at the valuation date. Land that will be serviced and accessed by your development, but is not yet, is valued without those improvements. That frequently produces a figure well below the number in the developer's own residual appraisal.

The valuer is independent of both parties and is appointed under the agreement. Both sides can make representations, but neither instructs the outcome.

And the land has to be acceptable to the authority as an asset. A pocket of land with an awkward shape, a maintenance liability, no access, or a ransom strip adjoining it will be declined whatever the valuation says. Authorities are alert to being handed land they cannot use.

Infrastructure payments and the authority's policy

Very few charging authorities have published a policy accepting infrastructure payments, so the first question is whether yours has. Check the charging schedule, the authority's levy pages and its infrastructure funding statement before building a strategy around the route.

Where a policy does exist, the mechanics usually require the infrastructure to be identified on the authority's infrastructure list, a specification and cost to be agreed, and the credit to be given either on completion or in tranches against milestones. The regulations prevent double counting, so you cannot claim credit for infrastructure that a section 106 obligation already requires you to provide.

Two commercial cautions. The credit is normally the agreed cost rather than the value to the authority, so efficiency gains accrue to the authority rather than to you. And you carry the delivery risk, including the cost of specification changes demanded by the authority or by a statutory undertaker, which on a highway or drainage asset can be material.

Agreement before work starts

The timing requirement is absolute and it is where schemes fall over. The agreement has to be entered into before development starts. Once a material operation has taken place, the liability crystallises as a cash liability and the in kind route is no longer available for that permission.

The practical sequence is therefore:

1. Confirm the authority accepts land or infrastructure payments, in writing, with reference to its published notice or policy.
2. Assume liability for the levy in the prescribed form.
3. Obtain the liability notice and check the chargeable amount.
4. Agree the land or infrastructure, the valuation mechanism and the credit arrangements, and complete the agreement.
5. Serve the start of works notice required by the regulations and begin.
6. Pay any residual cash balance under the demand notice and the instalment policy.

Steps one to four take months rather than weeks, because the authority will need a report to committee or a delegated decision, a valuation instruction and legal input. Build that into the programme, and do not assume the authority can move at your pace.

Valuation disputes and how they are settled

There is no dedicated statutory appeal on an in kind valuation, which is a point worth absorbing before you rely on the route. The statutory review and appeal provisions address the chargeable amount, surcharges and relief decisions rather than the value credited for land.

So the dispute mechanism is whatever the agreement provides. The usual drafting gives for determination by an independent expert, nominated by a professional body if the parties cannot agree, with costs shared and the determination binding. Negotiate three things into that clause: the basis of valuation stated expressly, the assumptions the valuer must adopt, and a longstop date after which either party can withdraw.

An illustrative example. A 180 dwelling scheme has a levy liability and includes a 0.4 hectare parcel the authority wants for a primary school extension. The developer proposes a land payment. The independent valuation treats the parcel as unserviced land with no separate access, and the credit lands well below the figure in the appraisal, where the parcel was carried at a serviced residential value. The developer withdraws the proposal and pays cash. This example is illustrative and valuations turn entirely on the facts.

When an in kind payment is worth pursuing

The circumstances where it works are specific:

• The land has little or no value to your scheme and a real value to the authority, for example an awkward parcel adjoining an existing facility.
• The authority has already identified the land or the infrastructure in its infrastructure list, so the internal case is already made.
• Your cash flow is the binding constraint and the levy demand falls before receipts.
• You are already delivering the infrastructure and the specification is settled, so delivery risk is low.

The circumstances where it does not work are equally specific. A speculative offer of land the authority has not asked for. A proposal made after work has started. A site where the parcel offered is needed for your own open space or drainage requirements. And any case where the difference between your appraisal value and an independent valuation is the reason the route looks attractive.

Evidence and timing

Assemble four things before you open the conversation. A title plan and report for the land, with any restrictions, easements and charges identified. A clean statement of the chargeable amount from the liability notice. Your own valuation advice, so you know the likely range before an independent valuer is appointed. And a programme showing the date by which the agreement has to be completed, working back from your start on site.

Keep the ordinary levy paperwork running in parallel, because if the in kind route fails you will need the cash position and the instalment policy to be intact. The same discipline applies to obligations that may need revisiting, as covered in discharging a section 106 obligation that no longer serves.

Where the levy and obligations together bear on scheme viability, a Viability Assessment prepared to the RICS professional standard is the document that carries the argument, and it is a report type where councils expect a suitably qualified author. Affordable housing interacts with the same arithmetic, through the Affordable Housing Statement.

This is general guidance, not legal advice; check the position with your local planning authority or a qualified professional before relying on it. The full set of report types is at the PlanScope report index.

PlanScope provides AI-assisted draft reports for planning applications. Reports should be reviewed before submission. We do not guarantee planning approval.