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Tax credit where it's due

The new accelerated tax credit scheme for the clean-up of contaminated land is good news for the remediation industry, says Merlin Hyman.

Announcement in the Budget of an accelerated tax credit scheme for clean-up of contaminated sites will provide a real boost to the land remediation industry.

Developers of contaminated land will be allowed to set 150% of the remediation cost against tax.The measure is due to come into force shortly, with Royal Assent of the Finance Bill.

Announcement of the tax credit follows detailed discussions between Environmental Industries Commission (EIC) members, the Treasury and the Inland Revenue on the fiscal measures needed to encourage property developers to invest in brownfield site development.

Government policy has long been to encourage the clean-up and re-use of sites (notably Deputy Prime Minister John Prescott's pledge that 60% of new housing will be built on previously developed land), but the cost of tackling the legacy of contamination on many such sites has been a significant deterrent.

The tax incentive will have a major impact in tipping the balance for property developers, from investing in greenfield sites to redeveloping brownfield ones.

However, some key issues depend on the Inland Revenue's (and the courts') interpretation of the legislation before it becomes clear which sites are eligible and what the 'on the ground' impact of the measure will be.

Most importantly, the Treasury has decided that land is contaminated when 'harm is being caused or there is a possibility of harm being caused; or pollution of controlled waters is being, or is likely to be caused' This broad definition leaves plenty of scope for debate.

EIC will lobby to ensure the inclusion of as broad a range as possible of contaminated sites.

Another important restriction is that if the site owner is wholly or partly responsible for its contamination, expenditure by this company will not qualify for tax relief.

This is intended to ensure the Government does not pay companies to clean up their own pollution. In practice, whether an owner has 'partly' contaminated a site will be open to argument.

The tax credit comes into force as a number of new regulations are beginning to have an impact on the management and clean-up of contaminated sites: the new contaminated land regime, the EU Integrated Pollution Prevention and Control Directive and the EU Landfill Directive.

EIC has lobbied for incentives to encourage developers to invest in brownfield sites and is delighted to see this measure introduced.

However, as with the new regulatory structures coming into force, its impact depends greatly on how it is implemented. EIC will continue to lead the land remediation industry's lobbying of the Treasury and the Inland Revenue on these issues.

Merlin Hyman is director of the Environmental Industries Commission.

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