What section 106 can secure that the levy cannot

The community infrastructure levy pays for infrastructure in general. A section 106 obligation pays for the specific thing that makes this development acceptable. That single distinction explains almost every argument between an applicant and an authority about which mechanism should carry a contribution, and it is written into regulation 122 of the Community Infrastructure Levy Regulations 2010.

Under regulation 122, a planning obligation may only be taken into account in granting permission if 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. The levy is subject to none of those tests. It is a charge per square metre set out in an adopted charging schedule, and the authority spends it where it chooses within the rules on infrastructure.

The three tests a planning obligation must meet

The regulation 122 tests are statutory, not policy, so an obligation that fails them cannot lawfully be taken into account. In practice the tests do most of their work at the negotiation stage, when an officer asks for a contribution towards something that the scheme does not make necessary.

Ask three questions in order. Would the development be acceptable without this obligation? If the answer is yes, the obligation fails the first test. Does the need arise from this development rather than from an existing deficiency? If it does not, the second test bites. Is the sum proportionate to the impact the scheme actually causes? A flat rate contribution applied to every application regardless of size will struggle on the third.

Authorities that maintain a tariff style schedule of contributions in a supplementary planning document are not automatically in breach, because the schedule can be a starting point. It becomes a problem when it is applied without a site specific justification.

Site specific mitigation against pooled infrastructure

Some mitigation can only sit in an obligation. A new bus stop outside the site entrance, a footway link across third party land, a financial contribution to a specific junction improvement identified in the transport assessment, off site habitat land for biodiversity net gain, travel plan monitoring, a management company for open space: each of these exists because of this scheme and is tied to it.

Other infrastructure is pooled by nature. Secondary school places across a district, a leisure centre, a strategic road scheme, town centre streets and squares: no single application makes any of them necessary, and the levy exists precisely to collect small amounts from many developments towards them.

The practical consequence is that you should resist a section 106 request for something that appears in the authority's infrastructure funding statement as levy funded, and you should expect to pay through an obligation for anything the officers can point to on your own red line plan.

Affordable housing and why it stays in section 106

Affordable housing is delivered by obligation, not by the levy. The levy is a charge on floorspace that funds infrastructure, and it cannot deliver on-site tenure mix, nomination rights, a mortgagee in possession clause, a cascade for unsold units or the staircasing rules for shared ownership. All of those need a deed.

That is why affordable housing negotiation, viability testing and the drafting of the obligation run together. Where a scheme cannot support policy compliant provision, the argument happens inside the viability assessment and is recorded in the deed through a review mechanism rather than through a reduced levy bill. The levy is not negotiable in that way, though relief and exemptions exist for self-build, social housing and charitable use.

First Homes add their own drafting requirements, including the discount and its perpetuity, as set out in our note on how the First Homes obligation works. The Affordable Housing Statement is the document that explains the offer to the officer before the deed is drafted.

Double charging and how authorities avoid it

An authority cannot use both mechanisms to pay for the same item twice, and the test is whether the obligation is necessary once the levy contribution is taken into account. Since 2019 the control on this is transparency rather than a fixed list: charging authorities publish an infrastructure funding statement each year setting out what the levy has collected, what it has been spent on and what obligations have been secured.

Read the statement before you negotiate. If the project the officer wants a contribution towards appears there as levy funded, say so in writing at the pre-application stage. If it does not appear, an obligation is the right route and arguing about it only delays the decision.

The regulation 123 legacy and what replaced it

Until 2019 two controls sat in the regulations. A charging authority published a regulation 123 list of the infrastructure the levy would fund, and obligations could not be pooled from more than five separate planning permissions towards a single project. The 2019 amendment regulations removed both, replacing them with the annual infrastructure funding statement.

The practical effect is that authorities can now pool obligations without the five permission limit, which makes the regulation 122 tests the main discipline on what can be asked for. Older advice that relies on the pooling restriction is out of date, and quoting it in a negotiation marks you out as working from a stale precedent.

Negotiating where the authority asks for both

The usual flashpoint is education or highways. The officer asks for a contribution calculated from a county formula, and the district is a levy charging authority whose funding statement shows levy receipts allocated to school expansion. Both cannot be right for the same places.

Deal with it in this order.

1. Ask which specific project the contribution funds and where it appears in the funding statement.
2. Ask for the evidence that the need arises from your development, in the form of pupil yield or trip generation applied to your unit mix.
3. Offer the mitigation that is site specific, which usually costs less and is always more defensible.
4. Put the regulation 122 analysis in writing, applied item by item, and ask for a response before the committee report is drafted.
5. If the request survives all of that, accept it and move on, because an appeal on obligations alone rarely repays the delay.

Small schemes have their own route out. Residential extensions and self-build dwellings can claim levy exemptions, and the traps in those claims are covered in our note on the residential extension exemption. Development appraisals also need the levy treated as a fixed cost rather than a negotiable one, which changes the return assumptions discussed in developer return assumptions in viability.

Recording the split in the heads of terms

Heads of terms should list each obligation, the trigger for payment or delivery, the indexation basis, the review mechanism where one applies, and a sentence explaining why the item meets the regulation 122 tests. Adding that sentence forces the discipline early and gives the officer the wording for the committee report.

Note that the Levelling-up and Regeneration Act 2023 contains powers for a replacement infrastructure levy, and implementation has moved more than once, so check the current position before advising a client on a scheme with a long programme.

PlanScope drafts the planning statement and the affordable housing statement that set out the obligations case, and flags where figures are missing. PlanScope provides AI-assisted draft reports for planning applications. Reports should be reviewed before submission. We do not guarantee planning approval. The deed itself is legal drafting and belongs with a solicitor.

This is general guidance, not legal advice. Check the position with your local planning authority and your legal adviser before relying on it. Enter your postcode on PlanScope to see which supporting documents your scheme is likely to need.