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Land remediation relief will not be abolished, Government says

The Government has decided not to abolish the land remediation tax relief as it would risk "plans to support the housing and construction sectors through planning reforms and the release of large areas of publicly owned land for development", it has said.

A recent consultation included proposals to abolish land remediation tax relief along with 35 other tax reliefs. But following a recent consultation the Government will keep the relief, the HM Treasury said in a report (32-page / 276KB PDF) on the consultation.

The original purpose of the land remediation relief was to provide a financial incentive to developers to bring into use contaminated land back or land containing derelict structures that would be prohibitively expensive to remove.

Respondents to the consultation argued that the removal of the relief would affect the regeneration of uneconomic brownfield sites and could make proposed developments unviable.

"Remediation relief [is taken] into account when considering sites and removal of this relief would make a significant number of their planned projects financially unviable," developers said.

The relief gives developers a tax break when regenerating brownfield land. It provides that the expenditure incurred by companies in cleaning up land in the UK acquired from third parties in a contaminated state qualifies for a corporation tax relief.

About 1,300 companies claim the relief each year, which costs the Exchequer around £40 million, the Treasury said. The Government agreed with the Office of Tax Simplification’s view that the relief failed to deliver its policy objective, so a consultation was launched which proposed its abolition.

The Government has now announced that it will not remove the relief because it wants to support housebuilding and regeneration.

"The Government has considered the responses and decided that removal of this relief would risk undermining the Government’s plans to support the housing and construction sectors through planning reforms and the release of large areas of publicly owned land for development," the report said. "The Government has therefore decided not to abolish this relief."

Land remediation relief gives a corporation tax deduction of 150% on qualifying expenditure incurred in decontaminating land.

"£1 m expenditure gives rise to £420,000 worth of tax relief for a company paying 28% tax, but only £405,000 of relief once the rate of corporation tax reduces to 27%. If you are not making profits you can get a cash payment worth 16% of the expenditure," a briefing note (4-page / 135KB PDF) from Pinsent Masons, the law firm behind Out-Law.com, said.

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