The move, which is expected to generate an additional £40 million in revenues for the Treasury, is intended to encourage construction companies to carry out on-site soil cleaning.
Despite the perceived gains, some committee members voiced concern that the draft document lacked comprehensive figures on the actual costs entailed in phasing out the exemption, and questions were raised about how realistic the projected £40 million recoup was.
In particular, John Redwood, Conservative MP for Wokingham, asked if the move was “felicitous” as the country was going into a recession, adding “Will the extra cost not be damaging to businesses?”
However, Angela Eagle, the Exchequer Secretary to the Treasury, said that the government also planned to extend land remediation relief, a corporation tax relief, to cover expenditure on derelict land and achieve “fiscal neutrality.”
She said: “We believe the time is right to phase out this exemption. The order will achieve the phase-out in a way that ensures that the exemption comes to an end within a defined period. At the same time, those who have worked up projects for land in expectation of being able to benefit from the exemption will have a reasonable opportunity to do so.”
Exemption
Currently enshrined within the Finance Act 1996, the planned phase out would mean companies hoping to still receive exemption under the previous Act would need to apply for certification by November 30, while those reaching Her Majesty's Revenue and Customs by December 1 would still be considered even if they did not possess all applicable information.
However, the tax exemption will now be phased out by 2012 and land remediation relief will be extended on April 1 2009 as part of the Budget process.
Ms Eagle explained that the methods of treating contaminated soils on site had already improved to date, especially since the Landfill Tax escalator was introduced, and said she did not envision a huge amount of inconvenience caused by transferring focus from Landfill Tax exemption to land remediation.
Supporting this idea, Nick Raynsford, Labour MP for Greenwich and Woolwich, said: “At the Olympic site, exemplary results have been achieved in extremely difficult circumstances against a very tight project management timetable to deliver an enormous amount of work by 2012.”
“Most of the people who have looked at that have been surprised by what has been achieved there. If remediation is possible in such circumstances, I suspect that it will be in most, provided that there is the will to do it,” he added.
However, Ms Eagle ackowledged that not all sites would be able to wash soil on site, forcing them to pay Landfill Tax.
She said: “In some cases, it is not possible to do all the decontamination on site, but we are interested in continuing to incentivise research and development in that area so we can reduce to the absolute minimum the amount of material that has to be physically removed from the site for it to be cleaned.Asbestos is a clear example of something that one would not wish to remain on a contaminated site.”
She added: “This process has been in the public domain for over a year, and it would be hard for the industry to argue that it had not been made aware that it was going on.”
The agreement to phase out the landfill tax exemption for material from contaminated land comes despite fears raised in 2001 that it could delay inner-city generation (see letsrecycle.com story).
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