Section 106 or CIL: which dominates at each scale
Below the major threshold the Community Infrastructure Levy is usually the larger and less negotiable cost. Above it, affordable housing makes section 106 dominant. How to model both.
At one to nine units the Community Infrastructure Levy is usually the larger bill and the one you cannot argue with. At ten units and above, section 106 overtakes it, because affordable housing arrives and affordable housing is worth more than any levy charge on the same floorspace. That crossover is the single most useful thing to hold in your head when appraising a site, and it is why two schemes of similar floorspace on either side of the major threshold have completely different cost structures.
The levy is arithmetic. The obligation is negotiation. Model them differently.
What each mechanism is for
The Community Infrastructure Levy, under the Community Infrastructure Levy Regulations 2010, is a fixed charge per square metre of net additional gross internal floorspace, set by the charging authority in an adopted charging schedule and indexed annually. It funds the cumulative infrastructure needs of an area: roads, schools, health facilities, open space. It is not scheme-specific and it is not negotiable.
Section 106 of the Town and Country Planning Act 1990 secures obligations that make a particular development acceptable. Affordable housing, site-specific highway works, on-site open space and its maintenance, a travel plan, education or health contributions where the local evidence supports them, and in some areas a monitoring fee.
The practical difference in a development appraisal is certainty. You can calculate the levy to the pound on the day you fix the floor areas. You cannot calculate the obligation until the heads of terms are agreed, which is usually weeks before determination.
The tests an obligation must meet
Regulation 122 of the levy regulations makes three tests statutory. An obligation may only be taken into account in a decision where it is necessary to make the development acceptable in planning terms, directly related to the development, and fairly and reasonably related in scale and kind to it.
Those tests are your main protection against a request for a contribution that has no evidence behind it. Ask for the policy basis, the calculation and the infrastructure project the money is for. An obligation that fails any limb cannot lawfully be given weight.
The pooling restriction that used to sit alongside those tests, limiting authorities to five obligations towards a single infrastructure project, was removed in September 2019. Agents who learned the system before that date sometimes still argue it, and the argument no longer runs.
In its place came transparency. Charging authorities must publish an infrastructure funding statement each year, setting out levy receipts, section 106 income and what both have been spent on.
Where the levy replaces site-specific contributions
Councils are expected to say which infrastructure they intend to fund through the levy and not then seek section 106 contributions towards the same items. The infrastructure funding statement is where that split is set out, and it is a published document you can quote back.
In practice the boundary falls roughly like this. Strategic and cumulative infrastructure, meaning secondary school places, a leisure centre, district-wide transport improvements, comes through the levy. Mitigation that only this development needs, meaning the junction improvement at your access, the play space inside your site, the affordable units, the drainage maintenance company, comes through section 106.
Affordable housing is specifically excluded from levy funding, which is the structural reason it always sits in an obligation.
Highway works in the public highway usually arrive through a third route entirely, an agreement under section 278 of the Highways Act 1980, and the cost sits outside both the levy and the obligation.
Scale at which section 106 dominates
| Scheme scale | Usual dominant cost | What drives it |
|---|---|---|
| 1 dwelling | Levy, unless exempt | Self-build exemption can remove it entirely |
| 2 to 9 units | Levy | No affordable housing requirement outside designated rural areas |
| 10 to 49 units | Section 106 | Affordable housing becomes policy-compliant at the major threshold |
| 50 to 149 units | Section 106 by a wide margin | Affordable housing plus education, open space and travel measures |
| 150 units and above | Section 106, with phasing and review mechanisms | Site-wide infrastructure, strategic consultees, longer build programme |
The step at ten units is the one to plan around. National policy restricts affordable housing contributions to major development outside designated rural areas, so a scheme of nine houses carries none and a scheme of ten carries the full local percentage. Designated rural areas are the exception, where authorities may set lower thresholds, and those are listed by order rather than guessed at.
Self-build is the other discontinuity. The levy exemption for self-build housing is available on a single dwelling built by the owner for their own occupation, claimed before works begin and supported by evidence afterwards, with a clawback if the property is sold within three years. Miss a procedural step and the full charge becomes payable, which is a harsh outcome on a one-off house. Larger sites have their own self-build and custom build duties, covered in the piece on self-build and custom build duties on larger sites.
Double charging and how to avoid it
The risk is paying twice for the same infrastructure, once through the levy and once through an obligation.
Three checks catch most of it. Read the charging authority's infrastructure funding statement and its regulation 123 successor arrangements to see what the levy funds. Ask, in writing, for the evidence that each requested contribution is for something the levy does not cover. And check whether the contribution duplicates a requirement already imposed by condition, because a condition and an obligation securing the same thing is both unnecessary and a drafting risk.
Net floorspace is where levy overcharging happens. The charge applies to net additional floorspace, so existing buildings in lawful use that are being demolished or converted generate an offset, provided the lawful use test is met. On a brownfield site that offset can be the difference between a viable scheme and a stalled one, so evidence the existing floorspace and its use carefully, with measured surveys rather than estimates.
Infrastructure funding statements and what to read
Each charging authority publishes an infrastructure funding statement annually, by the end of December, covering the previous financial year. It reports levy receipts and expenditure, section 106 income, what remains unspent, and the infrastructure the authority intends to fund.
Read three parts of it before you negotiate. The list of intended levy-funded infrastructure, because anything on it should not reappear as an obligation. The unspent balances, because an authority holding large unspent sums for a project it has not delivered is in a weaker position asking for more. And the obligations agreed on comparable schemes, which is the best available guide to what your heads of terms will look like.
Modelling both in the appraisal
Treat the levy as a fixed cost line, calculated from the net additional floorspace and the current indexed rate, payable on the schedule set by the authority's instalment policy. Model it at the indexed rate for the year you expect to start, not the rate on the day you appraise.
Treat section 106 as a range, with a policy-compliant case and a reduced case, and show both. Where you intend to argue that the policy level is unaffordable, the appraisal has to be built to viability guidance standards from the start, and the Affordable Housing Statement has to match the appraisal's tenure assumptions.
Two timing points affect cash flow more than the headline figures. Levy payments are triggered by starting work, with instalments if the authority has an instalment policy, so they land early. Obligation payments are usually triggered by occupation of a stated number of units, so they land later and can be phased. On a scheme phased across several reserved matters approvals, getting those triggers aligned with sales receipts is worth more than shaving a few pounds off either total.
At 50 units and above the consultation requirements grow too, and a Statement of Community Involvement becomes part of the submission rather than an optional extra.
One honest uncertainty. Not every authority has adopted a charging schedule, and in those districts everything comes through section 106, including the strategic items the levy was designed to cover. Check whether a schedule is in force before assuming the split above applies.
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This is general guidance, not legal advice; check the position with your local planning authority or a qualified professional before relying on it. PlanScope provides AI-assisted draft reports for planning applications. Reports should be reviewed before submission. We do not guarantee planning approval.
Frequently asked questions
Can viability reduce a Community Infrastructure Levy charge?
Generally no. The levy is a fixed charge calculated from the adopted charging schedule and net additional floorspace, and it is not open to negotiation on viability grounds. Some charging authorities make exceptional circumstances relief available, but it has to be offered by the authority and comes with its own conditions, so treat the levy as a fixed cost.
Does the pooling restriction on section 106 still apply?
No. The limit of five obligations towards a single infrastructure project was removed in September 2019. Authorities must instead publish an annual infrastructure funding statement showing levy and obligation income and expenditure. The regulation 122 tests of necessity, direct relationship and fair and reasonable scale continue to apply to every obligation.
At what scale does affordable housing start to apply?
National policy restricts affordable housing contributions to major development, which for dwellings means ten or more units, outside designated rural areas. That makes the step from nine to ten units the sharpest cost change in the residential pipeline, because the full local affordable percentage arrives at once. Designated rural areas can have lower local thresholds.
How do I avoid paying twice for the same infrastructure?
Read the charging authority's infrastructure funding statement to see which infrastructure the levy is intended to fund, and ask in writing for evidence that each requested contribution covers something the levy does not. Also check that no condition already secures the same thing, because duplication fails the necessity test in regulation 122.
Does demolishing an existing building reduce the levy?
It can. The levy applies to net additional gross internal floorspace, so floorspace in buildings that have been in lawful use for a qualifying period can be offset against the new floorspace. The test is about lawful use rather than the building simply existing, so measure and evidence the existing floorspace properly before relying on the offset.
Sources and further reading
This article is general guidance about the planning system in England and, where stated, the rest of the UK. It is not legal or professional advice. Check your local planning authority’s validation requirements and take professional advice for your specific site.