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Waste tax hits contractors

Contractors fear cost increases as Treasury scraps tax relief on waste from brownfield sites.

Struggling ground remediation firms hit by the property downturn this week urged government to back down over plans to scrap tax relief for new brownfield developments.

Under the plans, companies will no longer be able to claim an exemption from tax on contaminated waste sent to landfill from new clean-up projects as from next month. Projects that are already underway can continue to claim the exemption but only until April 2012.

The Environmental Industries Commission (EIC) said that because some materials will still be unsuitable or too expensive to treat onsite, developers will be unwilling to pay the tax.

The Treasury has said that ending the exemption is intended to stimulate more onsite remediation and will have a revenue neutral effect on developers. It has pledged to extend tax relief on profits from the development of sites that are more than 10 years old, to make up for the loss of relief on waste sent to landfill.

However, the EIC has claimed that the extension of the relief will not compensate the industry because developers are not eligible to claim the tax relief if the clean-up project is already receiving public subsidy. This accounts for projects on most derelict sites, says EIC director Merlin Hyman.

He added that some of its members had warned that the end of exemption would result in them paying an extra £1M on some sites. "Our members are concerned that this will not be tax neutral," said Hyman. "The view of our members based on years of experience is that they will be giving out more than they will be getting back. "The majority of derelict sites have remained that way because they have some fairly serious issues that are unlikely to get sorted out without some form of government funding. "So there are very few cases where you could claim the relief."

Partner at quantity surveyor Davis Langdon, Ben de Waal, has worked out the industry’s potential loss: "The Treasury anticipates additional receipts of £40M a year from the end of the exemption but we think it will be a lot higher than that. They will grant tax relief on £250M of development for £40M to be tax neutral, but when you look at the sites that could qualify for derelict land tax relief it’s going to be nowhere near £250M."

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