CIRD60170 - Remediation of contaminated land: definition: subsidised expenditure

Subsidised expenditure includes expenditure met, directly or indirectly, by anyone other than the company (or sub-contractor), as well as expenditure met by grants and subsidies.

Where the grant, subsidy or payment is not allocated to particular expenditure of the company (or subcontractor), it is to be allocated in a just and reasonable manner (FA01/SCH22/PARA8).

Example 1

Company A acquires contaminated land, as a fixed capital asset of its trade, from Company C at an agreed acquisition cost of £1 million. The agreement also contains a condition that Company C will meet up to £100,000 of Company A's land remediation costs. Company A engages the services of an unconnected sub-contractor to remediate the contaminated land at a cost of £150,000.

Company A's qualifying land remediation expenditure is £50,000. The additional £100,000 is subsidised by Company C. Company A can elect for £50,000 to be an allowable deduction in computing its Case I trading profit (or loss) and claim additional land remediation relief of £25,000 in its Case I computation.

Example 2

Company B acquires contaminated land from Company D, as a fixed capital asset of its trade, at an agreed acquisition cost of £900,000. Company B engages the services of an unconnected sub-contractor to remediate the contaminated land at a cost of £150,000.

Company B's qualifying land remediation expenditure is £150,000 and it can elect for that amount to be an allowable deduction in computing its Case I trading profit (or loss) and claim additional land remediation of £75,000 in its Case I computation.