Corporation Tax Act 2009 section 1157

Exclusion for capital gains purposes of certain expenditure

Section 1157 prevents expenditure that has already been the subject of a land remediation tax credit from also being deducted when calculating a chargeable gain or allowable loss on the disposal of the land.

• Where a company receives a land remediation tax credit payment, the underlying qualifying expenditure cannot also be used as an allowable cost for capital gains purposes.
• This prevents a double tax benefit — once through the tax credit and again through a reduced chargeable gain on disposal of the land.
• The rule is needed because expenditure surrendered for a tax credit, rather than used in the normal computation of profits, might otherwise escape the general prohibition on double deductions.
• The restriction applies only to the actual expenditure incurred, not to the 50% additional deduction which is a notional figure rather than real spending.