FA 2001 says that a company acquiring contaminated land for the purposes of its business will be able to claim a deduction from its profits for tax purposes of up to 150% of its clean-up costs. Thus, when a company incurs the capital expenditure it can make a deduction of 150% of the expenditure in computing its taxable profits. In the case of companies such as developers, where the base expenditure is in any event treated as a deduction in computing its profits, an additional deduction of 50% is available.

Deciding whether land is in a ‘contaminated’ state can of course raise difficult issues. In general terms, there will have to be substances in, on or under the land that are causing harm, or giving rise to the possibility of harm being caused. But, if contamination can be shown then a valuable – and not widely known – tax break is available. The logic behind granting such relief is to encourage companies to consider regenerating brownfield sites (indeed, about 70% of all new homes are currently built on such sites). Whilst remediation tax relief is well known to the major developers there does seem to be widespread ignorance of it among small developers. Source: Lovells. © Practical Lawyer