CIRD60165 - Remediation of contaminated land: definition: qualifying expenditure on sub-contracted land remediation

A company incurs sub-contracted land remediation expenditure when it makes a payment to another person for relevant land remediation that it has contracted out to that person (FA01/SCH22/PARA9).

Company and sub-contractor are not connected persons

If the company and the sub-contractor are not connected persons, then the whole of the sub- contractor payment is treated as qualifying expenditure on sub-contracted land remediation (FA01/SCH22/PARA11).

Company and sub-contractor are connected persons

The question of whether a sub-contractor is connected to a company is to be determined in accordance with the provisions of ICTA88/S839 (FA01/SCH22/PARA31 (4)).

If the company and the sub-contractor are connected persons then a payment is qualifying expenditure on sub-contracted land remediation only if certain conditions are met (FA01/SCH22/PARA10). If the conditions are met, then the qualifying expenditure on subcontracted land remediation is restricted to relevant expenditure of the sub-contractor (see below).

The conditions are that in accordance with normal accounting practice:

• the whole of the payment is brought into account in determining the sub-contractor's profit or loss for an accounting period that ends not more than twelve months after the accounting period of the contracting company in which the payment is an allowable deduction, and
• that all of the sub-contractor's relevant expenditure is brought into account in determining the sub-contractor's profit or loss for an accounting period that ends not more than twelve months after the accounting period of the contracting company in which the payment is an allowable deduction.

For these purposes any apportionment of the expenditure, of either the company or the subcontractor, is to be made on a just and reasonable basis.

Relevant expenditure of the sub-contractor

Relevant expenditure of the sub-contractor is expenditure that is incurred by the sub-contractor in carrying out the land remediation activities to which the sub-contractor payment relates, that:

• is incurred on employee cost and materials (see CIRD60160),
• is not of a capital nature, and
• is not subsidised (see CIRD60170).