A company that acquires a site in a contaminated or long term derelict state and pays to put it right can deduct 150% of the qualifying cost for corporation tax: the normal 100% plus an extra 50%. The relief is in Part 14 of the Corporation Tax Act 2009, applies to both revenue and capital spending, and a loss making company can swap the relevant loss for a payable credit of 16%. It is not available to the company that caused the problem, to individuals or to partnerships.

Who can claim the relief?

The relief is for companies only. HMRC’s Corporate Intangibles Research and Development Manual (CIRD60050) confirms it is not available to individuals or partnerships, although a corporate partner can claim on its share of a partnership’s spending. The company must:

  • hold a major interest in property in the UK, meaning it owns the freehold, has been granted a lease of at least seven years, or has been assigned a lease with at least seven years left (CIRD69015);
  • have acquired that interest for the purposes of its trade or property business;
  • have acquired it when all or part of the site was already in a contaminated or derelict state.

The polluter pays principle runs through the relief. CIRD60100 excludes claims where the company, or anyone connected with it, caused the contamination or dereliction by action or inaction; where a landlord is cleaning up contamination caused by its tenant; for nuclear sites; and where arrangements have been put in place to create or enhance a claim. Both property developers and investors can claim, so it is worth knowing which side of that line the company sits on, because it decides the timing of the deduction.

What counts as a contaminated site?

For spending from 1 April 2009, a site is in a contaminated state if contamination present as a result of industrial activity is causing relevant harm, or there is a serious possibility that it could, or it is causing or could cause significant pollution of groundwater, rivers, streams or coastal waters (CIRD60015). Relevant harm means significant adverse effects on the health of people or animals, or damage to buildings that has a real impact on how they are used. Precautionary work with no evidence that a harmful substance is present does not qualify.

Natural contamination is generally outside the relief, but secondary legislation adds three exceptions: naturally occurring arsenic and arsenical compounds, radon, and Japanese knotweed. CIRD60025 stresses that nothing else qualifies by analogy. Knotweed has its own rules:

  • it does not need to have been present when the site was acquired, so an infestation caused by fly tipping can qualify;
  • sending knotweed material to landfill no longer qualifies, though other methods, including off site treatment centres, do;
  • a company that lets an infestation spread without acting is treated as the polluter. HMRC accepts a company is acting if it takes specialist advice and follows it, even if that means waiting for the next growing season.

What counts as a long term derelict site?

A derelict site is one that is out of productive use and cannot be brought back into use without removing buildings or other structures on it. To be long term derelict, CIRD60020 says it must have been derelict since the earlier of 1 April 1998 and the date the claimant company or a connected party acquired it. HMRC accepts evidence such as the national databases of vacant and derelict sites kept for England and Scotland (CIRD62010).

The qualifying work on derelict sites is a closed list. Relief covers the cost of finding out which redundant structures are present and of removing:

  • post tensioned concrete heavyweight construction;
  • building foundations and machinery bases;
  • reinforced concrete pilecaps;
  • reinforced concrete basements;
  • redundant gas, water, electricity and telecommunications services.

General demolition of ordinary buildings is not on the list and does not qualify by analogy.

Which costs qualify?

Section 1144 sets the conditions, summarised at CIRD63050. The expenditure must be on a UK site acquired for the trade or property business, must be incurred because the site is contaminated or derelict and would not otherwise have been incurred, and must be on remediation undertaken by the company. It must fall into one of four categories: staffing costs, materials, work contracted out to an unconnected person, or qualifying work subcontracted to a connected person. Subsidised expenditure and landfill tax are excluded.

For contaminated sites, qualifying work includes establishing the level of contamination and removing it or containing it so that the risk of relevant harm is removed. There is no relief if the remediation is never carried out, so a survey for a purchase that falls through does not qualify.

How is the deduction given for revenue and capital spending?

For revenue spending, the timing follows the accounts (CIRD60055). A developer that carries the cost in work in progress gets the relief in the period the cost is charged to profit and loss, usually when the units are sold. HMRC’s example is a housebuilder that clears contamination in year one, sells the houses in year two, and can claim only in year two.

Capital spending, such as remediation on a site held as an investment property, qualifies only if the company elects within two years of the end of the accounting period in which it is incurred to treat it as a deduction (section 1147). The election is not available for spending that qualifies for any kind of capital allowance, so plant and machinery stays in the capital allowances regime. The additional 50% is claimed within the normal time limit for corporation tax claims; HMRC does not require a particular form, and a computation that reflects the claim and is submitted in time is enough.

How does the payable tax credit work?

If the trade or property business makes a loss, the company can surrender a qualifying remediation loss for a cash credit. Under section 1152 the loss that can be surrendered is the lower of the unrelieved trading or property loss for the period and 150% of the qualifying expenditure. Section 1154 sets the credit at 16% of the loss surrendered, a rate unchanged since the relief began (CIRD68025). The claim is made in the company tax return or an amended return, and the surrendered loss cannot then be used again.

Illustration only. A development company buys a former engineering works from an unconnected seller and pays a contractor £200,000 to remove hydrocarbon contamination. The cost is in work in progress until the scheme is sold the following year, when it is charged to profit and loss.

Step Amount
Normal deduction £200,000
Additional 50% deduction £100,000
Total deduction in the year of sale £300,000
Unrelieved trading loss that year (assumed) £250,000
Qualifying loss: lower of £250,000 and £300,000 £250,000
Payable credit at 16% £40,000

The credit gives cash now. If the company expects profits taxed at the 25% main rate, carrying the loss forward could be worth £62,500 later, so the choice depends on cash needs and how certain future profits are. Our pages on company trading losses and group relief cover the alternatives.

Is the relief changing?

HM Treasury published a consultation on 13 July 2026, closing on 21 September 2026, saying the relief is not fully achieving its aim of encouraging remediation of brownfield and derelict sites. It proposes linking contamination to planning conditions, replacing the 1998 dereliction date with a new definition, possibly cutting the rate to 100% for sites that become derelict after 2027, and letting developers deduct qualifying costs in the year they are incurred rather than on sale. The current rules apply until any change is legislated; the government intends to set out its conclusions at Budget 2026.

What mistakes lead to refused claims?

  • The claimant or a connected company caused the contamination, or let knotweed spread.
  • The problem arose after acquisition (other than knotweed).
  • Claiming in the year the work was done when the cost sat in work in progress.
  • Missing the two year capital election.
  • Including landfill tax, precautionary works or general demolition.
  • Claiming as an individual or partnership rather than a company, which is covered by corporation tax.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.