When the qualifying land remediation is a revenue expense then the benefit is the extra 50% deduction. However, if it is capital expenditure then the benefit is the full 150% because the expenditure would not otherwise be deductible, as illustrated by the following example.

An investor, occupier or lessee acquires contaminated land as a fixed capital asset of its trade or Schedule A business. The company incurs £300,000 capital expenditure on qualifying land remediation in the accounting period and makes an election for the capital expenditure to be allowed as a deduction for tax purposes. It can claim a further deduction of £150,000, giving it an enhanced deduction of £450,000 in its Case 1 or Schedule A tax computation. At a corporate tax rate of 30% this is equivalent to 45% of cost.

It should be noted that qualifying land remediation expenditure cannot be included in base cost for CGT purposes and the relief cannot be claimed where the expenditure would otherwise qualify for capital allowances.

Life assurance companies are generally able to claim the relief provided they are not taxed under Schedule D Case 1. The legislation also includes specific provisions relating to the management assets of life assurance companies.