Financial modelling of land remediation is about to change significantly

United Kingdom

Since the establishment of landfill tax by regulations under the Finance Act 1996, landfill tax and other related fiscal incentives have been an important factor in shaping the clean up of many of the UK’s brownfield sites. Important changes to the fiscal instruments relating to land remediation may have profound impacts on the cost and methods of land remediation.

Landfill tax

Landfill tax was introduced in the UK pursuant to the Landfill Tax Regulations 1996. This tax is chargeable on the disposal of waste made by way of landfill at landfill sites. Its aim is to encourage waste producers to produce less waste, recover more from waste and to use more environment friendly methods of waste disposal.

Currently the standard rate for landfill tax is £32 per tonne. This is to increase by £8 per tonne each year until 2010, when it will reach £48 per tonne. There is a lower rate applying to inactive waste. This lower rate is £2.50 per tonne and will be frozen at this rate for 2009-10.

There are expectations that landfill tax may decrease the volume of waste going to landfill by up to 0.2MtC by 2010.

Landfill tax exemption

Currently, waste arising from remediation of contaminated land which is disposed of at landfill is exempt from landfill tax. This exemption is to be phased out by 1 April 2012. The purpose of phasing out the exemption is to decrease the volume of waste going to landfill and to encourage the remediation of land by more environment sustainable methods.

Importantly, until 1st December 2008, persons intending to dispose of contaminated soils at landfill can apply for and obtain from HMRC a relief certificate for the period of application to 31 March 2012. To apply for the relief certificate, the waste destined for landfill need not have been generated at the time of application (application must be at least 30 days prior to removal to landfill), however the cause of contamination to the land must have ceased. Anyone in possession of a relief certificate will then be able to benefit from the exemption until 31 March 2012. From 1 April 2012, all relief certificates will cease to be valid and all disposals of contaminated soils to landfill from this date will be liable to landfill tax. Some are estimating that these changes may increase off-site disposal costs for contaminated soil by very significant amounts.

Land remediation tax relief

Corporate businesses may claim relief against corporation tax if they remediate contaminated land or buildings. The relief allows a company to deduct 150 per cent of the capital expenditure (which is quite widely defined) of remediating and investigating contaminated sites on land remediation.

The Government’s intention is that from 1st April 2009, the revenue derived from removing the landfill tax exemption on contaminated soils will be used to extend the land remediation tax relief to expenditure on derelict land and to the removal of Japanese knotweed by treatment. The Government will consult in Summer 2008 on draft legislation to extend this relief.


These fiscal changes along with other instruments being implemented pursuant to the environment and sustainability agendas (such as site waste management plans and endeavours to bring some certainty to the question of when treated construction waste can be said to be no longer waste) are set to encourage a much greater volume of treatment of brownfield land (at least for the larger sites where such treatment is likely to be more feasible – for smaller sites this may not be so practicable). This is likely to stimulate more demand for cleantech products and services in the remediation sector. Combined also with rises in the costs of road transport fuel, the changes are likely to make remediation by “dig and dump” much more expensive than is currently the case.

Those who currently hold sites which are to be developed in the next few years might want to review whether they should be applying for relief certificates before 1st December 2008. Those who acquire or develop sites without the benefit of such certificates, will need to carefully consider how they financially model the remediation of such sites and/or what methods they intend to use to remediate such sites.