Section 106 or the levy: which pays for what
The levy is arithmetic from a published schedule and effectively non-negotiable. A section 106 obligation is drafted, tested against regulation 122 and viability-tested.
The short answer to section 106 vs community infrastructure levy is that the levy pays for infrastructure the area needs because development is happening, and a section 106 obligation pays for the things this particular scheme makes necessary. The levy is a tariff, calculated from a published schedule and effectively non-negotiable. A section 106 obligation is negotiated, tested against three statutory tests, and open to a viability argument. Both can apply to the same scheme, and on a major residential site they usually do.
Confusing them is expensive in both directions. Developers who treat the levy as negotiable waste months. Developers who assume the levy covers everything get a section 106 request they have not budgeted for.
How each mechanism is calculated
The levy is arithmetic. A charging authority adopts a charging schedule after examination, setting rates in pounds per square metre, usually varying by use and sometimes by zone within the district. The charge applies to net additional internal floorspace, with existing lawful floorspace deducted where the building has been in continuous lawful use for a qualifying period. Rates are indexed annually, so the figure in the schedule is not the figure you pay.
A section 106 obligation is drafted. It is a deed entered into under section 106 of the Town and Country Planning Act 1990, binding the land, registered as a local land charge, and containing whatever heads of terms the parties agree. Its content is driven by the authority's policies, the consultees' requirements and the scheme's own effects.
| Community infrastructure levy | Section 106 obligation | |
|---|---|---|
| Basis | Published charging schedule, pounds per square metre | Negotiated deed |
| Negotiable | No, apart from relief where adopted | Yes, and viability-tested |
| Trigger | Commencement of development | Triggers set out in the deed, often by phase or unit number |
| Binds | The liable party, with charge on the land | The land and successors in title |
| Spent on | Infrastructure identified by the charging authority | The obligations in the deed |
| Reported | Annual infrastructure funding statement | Annual infrastructure funding statement |
What the levy can and cannot fund
Levy receipts go towards infrastructure to support the development of the area, with a proportion retained for administration and a neighbourhood proportion passed to the parish or town council, or spent in the neighbourhood where there is no parish. A neighbourhood plan increases that local proportion.
What the levy is actually spent on is set out in the charging authority's infrastructure list, published within its annual infrastructure funding statement. That document is the first thing to read when a section 106 request arrives, because an authority that has told the public the levy will fund secondary school places cannot easily also ask for a section 106 contribution towards the same places.
Affordable housing sits outside the levy in practice. It is secured through a section 106 obligation, with the tenure split, the transfer arrangements and the triggers written into the deed and supported by an Affordable Housing Statement.
The three obligation tests
Regulation 122 of the Community Infrastructure Levy Regulations 2010 made the old policy tests statutory. An obligation may only be taken into account in deciding an application if it is:
- Necessary to make the development acceptable in planning terms.
- Directly related to the development.
- Fairly and reasonably related in scale and kind to the development.
All three have to be met. A contribution towards a leisure centre four miles away, with no identified project and no link to the scheme's own effects, fails the second and often the first.
Use the tests actively rather than defensively. When a request arrives, ask which effect of this development the obligation addresses, what the identified project is, and how the sum was calculated. Authorities with a published contributions formula will produce it. Authorities without one sometimes cannot, and the request is then vulnerable.
Site-specific mitigation against pooled infrastructure
The clean division is between mitigation and contribution.
Mitigation is work the scheme needs to be acceptable: the new access junction, the pedestrian crossing on the desire line to the school, the off-site drainage connection, the habitat land secured for biodiversity net gain, the travel plan and its monitoring. These are site-specific, they fail no regulation 122 test, and they belong in a section 106 obligation or in a highways agreement under section 278 of the Highways Act 1980.
Pooled infrastructure is the strategic item that many schemes contribute towards: the relief road, the new primary school, the extension to the leisure centre. Since 1 September 2019 the restriction limiting authorities to five pooled section 106 contributions per project has been removed, so pooling through section 106 is lawful again. That has blurred the boundary, and in some districts strategic items are now funded through section 106 pooling rather than the levy.
So read the local position rather than applying a general rule. Two neighbouring authorities can fund the same type of infrastructure by different routes.
Double charging and how councils avoid it
The mechanism is transparency. The infrastructure funding statement sets out what the levy will fund, and authorities are expected not to seek a section 106 contribution for an item the levy is already funding.
In practice three situations recur. An authority with a mature charging schedule and a clear infrastructure list rarely double charges. An authority that adopted its schedule years ago and has not updated the list sometimes does, usually by inertia rather than design. And an authority with no charging schedule at all funds everything through section 106, which makes the obligation larger and the negotiation longer.
Where you suspect double charging, make the point in writing with the infrastructure list attached, before the heads of terms are agreed. Once the deed is signed, the argument is over.
Reliefs, exemptions and instalments
The levy has a set of reliefs and every one of them has to be claimed before development starts. Miss the sequence and the relief is lost, which is one of the most common and least recoverable errors in development management.
The sequence for a liable party is an assumption of liability, then a relief or exemption claim where one applies, then a commencement notice before any material operation. Self-build exemption carries further obligations after completion, including evidence within a set period and a requirement to occupy the dwelling as a main residence for three years. Residential extensions below a stated floorspace threshold and residential annexes are also exempt on claim. Social housing relief and charitable relief have their own procedures.
Instalments depend on the charging authority's published instalment policy. Without one, the whole charge falls due shortly after commencement. With one, payment is staged, and failure to pay an instalment on time usually causes the whole balance to become payable immediately.
Section 106 obligations have no equivalent reliefs, but they do have viability. Where the obligations requested make the scheme unviable, the route is a Viability Assessment prepared on a recognised basis, which is a report type where councils expect a suitably qualified author and professional review is strongly advised.
Budgeting for both on one scheme
Build the two into the appraisal separately and at different levels of certainty.
The levy is a calculable number: net additional floorspace times the indexed rate, less any relief, payable on the authority's instalment profile from commencement. Treat it as a fixed cost and get it right early, because it cannot be negotiated down later.
The section 106 figure is a range. Take the authority's published formula or recent comparable agreements, add the consultees' likely requirements, add monitoring and administration charges, which are themselves a point of argument explored in the comparison of a section 106 monitoring fee and an administration charge, and carry a contingency. Then model the viability position if the full request is pressed.
Two further points worth holding in mind. A section 73 permission can cause the levy to be recalculated where floorspace changes, which is a trap on amendments and one of the differences covered in the comparison of section 73 against section 96A. And the Levelling-up and Regeneration Act 2023 contains powers for an Infrastructure Levy intended to replace the current levy over time. As at the date of writing those powers have not been brought into general force, so plan on the current regime and watch for commencement.
You can see where the viability and affordable housing documents sit alongside the rest of a major application pack in the full report index.
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 a council charge both the levy and a section 106 contribution?
Yes, and on major residential schemes it usually does. The levy funds infrastructure identified in the charging authority's infrastructure list, while section 106 secures what this particular scheme makes necessary, including affordable housing. What it should not do is charge twice for the same item, which the infrastructure funding statement is meant to prevent.
What are the three tests for a section 106 obligation?
Under regulation 122 of the Community Infrastructure Levy Regulations 2010 an obligation must be 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. All three must be met, so ask which effect of the scheme the request addresses and what project it funds.
Is the levy negotiable?
No. The rate comes from an examined charging schedule and applies to net additional floorspace, indexed annually. The only flexibility is in the reliefs and exemptions, and in exceptional circumstances relief where the charging authority has adopted it. Viability arguments belong to the section 106 negotiation, not to the levy calculation.
When must levy reliefs be claimed?
Before development starts, and in the right order: assume liability, claim the relief or exemption, then submit a commencement notice before any material operation. Miss the sequence and the relief is lost with no realistic route back. Self-build exemption also carries post-completion evidence requirements and a three-year main residence condition.
Is the pooling restriction on section 106 contributions still in force?
No. The restriction limiting authorities to five pooled section 106 contributions towards a single project was removed on 1 September 2019. Pooling through section 106 is lawful again, and some authorities now fund strategic infrastructure that way rather than through the levy, so check the local position rather than assuming.
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.