UNITED KINGDOM ENVIRONMENTAL LAW ASSOCIATION
CONTAMINATED LAND WORKING PARTY
COMMENTS ON THE FINANCE BILL 2001- TAX CREDIT FOR REMEDIATION OF
CONTAMINATED LAND
1.
UKELA submits the following comments and observations regarding the proposals in
the Finance Bill 2001 to provide tax credits to companies undertaking remedial works
on contaminated land. The Bill provides a welcome financial incentive for the
remediation and re-use of contaminated land.
2.
There is no formal consultation on the Bill, however, these comments are made in
order to highlight the significant implications of the Bill as currently drafted. The
adverse consequences could be easily avoided.
Definition of contaminated land
3.
UKELA’s primary concern is the definition of contaminated land which is adopted in
Schedule 22 to the Bill:
Land in a contaminated state
3. - (1) For the purposes of this Schedule land is in a contaminated
state if, and only if, it is in such a condition, by reason of substances
in, on or under the land, that(a) harm is being caused or there is a possibility of harm being caused;
or
(b) pollution of controlled waters is being, or is likely to be, caused.
4.
This definition is similar, but different in an important respect, to the definition of
contaminated land in Part IIA of the Environmental Protection Act 1990, which
defines contaminated land (in section 78A(2)) as:
...any land which appears to the local authority in whose area it is
situated to be in such a condition, by reason of substances in, on or
under that land, that (a) significant harm is being caused or there is a significant possibility
of such harm being caused; or
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(b) pollution of controlled waters is being, or is likely to be, caused.
5.
The key difference between the two definitions is in the omission of “significant” in
respect of harm. Further, there is no reference to the Statutory Guidance published as
Annex 3 to DETR circular 2/2000 and, in particular, to Tables A and B of Part 2 or
Chapter A of that guidance. This is a detailed statement of what constitutes
significant harm and seeks to put into practice two principles:
5.1
that land is remediated which is not suitable for use and hence that
only land is remediated when necessary for the intended use;
5.2
that any assessment of contaminated land is on the basis of risk of
harm and the setting of standards and targets which describe the level
of risk which is acceptable as a matter of policy.
6.
Because no reference is made to significance of harm nor to the substantial body of
guidance on the subject, the Bill as drafted could be properly interpreted to mean that
remedial works which alleviate perceived risks or potential common law liabilities
should attract the tax credit. That may, of course, be the intention of the Bill, but if
so, then it should make such policy clear beyond doubt because it would be a
fundamental change in contaminated land policy and practice.
7.
There is a second issue in the definition as to the pollution of controlled waters. This
part of the definition of contaminated land has given rise to problems in the
interpretation of Part IIA EPA. Amendments to the primary legislation have been
drafted and consulted upon, the purpose of which is to introduce a test of significance
to the pollution of the controlled waters. This is aimed at avoiding land becoming
"contaminated land" simply by virtue of the presence of an insignificant quantity of
contamination.
8.
The provisions in the Finance Bill regarding the pollution of controlled waters do not
contain a similar threshold. This may be intended, as a matter of policy, in order to
encourage site remediation and redevelopment. However, there is a real risk that
enforcing authorities will seek, as a matter of practice, to operate some de minimis
threshold in applying the definition of contaminated land to controlled waters. This
could give rise to considerable uncertainty in the application of the regime and involve
the enforcing authorities making judgements as to what contamination is material.
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Entitlement to the deductions
9.
Paragraph (5) of Schedule 22 states that companies will not be entitled to any
deductions so far as the land concerned is contaminated "wholly or partly as a result
of anything done or omitted to be done at any time by the company or a person with a
relevant connection to the company". Our concern relates to companies which may
potentially lose the benefit of any deductions as a result of their failure to take any
action. For instance, a company may be aware of contamination (and have the ability
to clean it up) but that contamination has not yet not triggered a clean-up liability. It
may therefore decide not to take immediate action to clean-up. Is it the intention that
such a company would be penalised as a result of those omissions and/or would not be
able to make deductions in relation to contaminants which have deteriorated or spread
during that period of inactivity? It may be preferable to remove the reference to
omissions altogether.
10.
Likewise, these provisions would appear to allow a company to claim the tax
deduction where the clean-up expenditure has been required under an environmental
permit. This is most likely to arise where a permit requires some remediation prior to
it being surrendered to the authorities (such as a waste management licence or PPC
permit). Such remediation may cover contaminants which the licence holder is not
responsible for (due to its acts or omissions) and which fall outside the exclusion in
paragraph (5). If this is not intended as a matter of policy, the legislation should be
revised.
Richard Kimblin and Matthew Townsend
UKELA Contaminated Land Working Party
10th May, 2001
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