Industry laments land remediation relief plans

Treasury plans to alter tax relief for contaminated land remediation have drawn concerns from the Environmental Industries Commission that the move will fail to stimulate clean-up.

The government is proposing to change the rules governing the payment of land remediation relief (LRR) to developers to clarify what they can claim for. It wants to extend the LRR to provide relief for the costs of clearing Japanese knotweed and remediating long-term derelict land.

The extension aims to recycle the revenue raised by the withdrawal of the exemption from landfill tax. The Treasury says that the move is intended to be "broadly revenue-neutral".

The intention to change the rules was announced in December 2007. A consultation found that many parties supported the changes (ENDS Report 394, p 44 ).

The Treasury proposes extending the 150% tax relief available to firms spending money on remediation to the costs of removing "dereliction". To qualify, the land must have been derelict since 1 April 1998. It must not be in productive use or able to be put into use without removing buildings or other structures. Relief will be given on works covered in a list, which the Treasury can add to.

Consultancy Davis Langdon is a member of the Environmental Industries Commission (EIC) and leads its LRR work. Davis Langdon partner Ben de Waal questioned whether the viability of derelict land remediation would be improved, given the length of dereliction needed and the limited scope of the extended relief. "But it will be a positive contribution that should be taken into consideration," he said.

The proposals also aim to discourage the removal of contaminated material to landfill. From April 2009, LRR will no longer be claimable on landfill tax costs. The EIC is seeking an exemption for asbestos, for which there is no on-site treatment. "This unnecessarily penalises an unavoidable cost," Mr de Waal said.

The proposals also aim to clarify the scope of the existing relief by confirming it will only be applied to the costs of remediating a site and not to any further development.

Currently, the legislation allows relief for removing contaminants present by natural process as well as those resulting from industrial use. But the Treasury intends to restrict this primarily to land contaminated by industrial activity.

Only costs incurred in dealing with arsenic, radon or Japanese knotweed will now qualify under natural processes. Contamination caused by air or water is also excluded. The EIC believes this will reduce the possibility of companies claiming for costs incurred on flood risk mitigation, mine shaft grouting and potentially dry and wet rot treatment works.

The Treasury has brought in measures to prevent polluters benefiting indirectly from the relief through sale and buy-back of land. The new provisions will mean that if a company buys land off a polluter and the polluter retains a ‘relevant interest’ in the land, the company cannot claim the relief. A relevant interest is defined as retaining a right over or licence to occupy the land.

The polluter is also deemed to have a relevant interest if the way land was sold reflects the change in value created by its remediation.

Richard Boyle, brownfield technical consultant at the Homes and Communities Agency, welcomed the changes. He believes the remediation of long-term derelict sites is now becoming more viable through policy changes such as the definition of waste code of practice (ENDS Report 405, pp 39-40 ).

He particularly welcomed the Treasury’s clarification on the treatment and removal of Japanese knotweed. This will now qualify for relief as long as it was not planted by the claimant or spread to the site while in the claimant’s ownership.

The Treasury is accepting comments until the end of February, after which it will publish guidance. It will clarify how the English National Land Use Database and the Scottish Vacant and Derelict Land Survey can be used to prove land has been derelict.

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