The clever money seems to be on March 2 as Budget Day. One of the issues highlighted in Gordon Brown's pre-budget report was a possible extension of Contaminated Land Tax Credit, perhaps with the introduction of a Derelict Land Tax Credit. The Contaminated Land Tax Credit has been a successful incentive for developing polluted land. It provides developers with tax relief for 150pc of the total clean-up costs - a significant in centive. Any plan to extend tax relief to land that has lain derelict for some time will open up significant opportunities for development. Not only will that protect our diminishing greenbelt, but it would provide the catalyst for further development in areas that have fallen into disrepair. The money spent on remediation, that is, cleaning up the land, qualifies if: * It is spent on land which is contaminated. * It is spent on paying employees and buying materials or is spent on sub-contractors. * The cost was not subsidised by anyone else. * It would not have been spent if the land wasn't contaminated. * It is spent on remediation as defined by the Inland Revenue. If your company makes a loss because of spending money on cleaning up land, you can apply for a tax credit of 16pc. When is land contaminated? Contaminated land contains substances that, when present in sufficient concentrations, may cause harm to humans, animals, the environment or other sensitive receptors. In the UK, contaminants are classified as hazardous materials, or gasses, that do not occur naturally on a particular site. "Qualifying land remediation expenditure" This means expenditure on contaminated land: * Undertaken directly by the company or on its behalf. * Which has not been incurred on contamination originated by the company. * On remedial and connected expenditure that is additional to normal site preparation costs. * If carried out by the company, consists only of employee costs or materials. * If incurred on the company's behalf, must be paid to a sub-contractor. Employee costs qualify for the tax credit if they are directly engaged for more than 80pc of their time on land remediation. If some employees are working for less than 20pc of their working week on remediation work, then their costs are not allowable for the 150pc deduction and the usual rules on deducting corporation tax apply. Sub-contractor's costs Sub-contractor's costs are included, although there are restrictions when the sub-contractor is connected to the firm. These are materials employed directly in the relevant land remediation. Tax Claim You must make an election in writing to the Inland Revenue within two years following the end of the accounting period in which the costs are incurred. Contaminated land could represent a tax gold mine for some property companies. To ensure you benefit from the available tax credit, and that it is calculated correctly, requires careful, expert help. Meanwhile, we'll have to wait until March to see if there is an extension of the tax credit in the budget. Richard Freeman-Wallace is head of property at Watson Burton LLP. | 
Business Comment
Enterprise North East
Evening Gazette's
