Land – Contamination – Land remediation relief – Appellant company claiming land remediation relief in respect of expenditure on improving and replacing gas distribution pipes – Respondent commissioners refusing claim – First-tier tribunal and Upper Tribunal dismissing appeal – Appellant appealing – Whether land in contaminated state wholly or partly as result of anything done or omitted to be done by appellant or person with relevant connection to appellant – Appeal dismissed
In 2005, the appellant acquired one of eight regional gas distribution networks in the UK. It thereby obtained, and became responsible for, some 37,000 kilometres of gas pipeline, much of which was made of iron. Iron pipes were liable to corrode or fracture over time and thus gave rise to the risk of escaping gas and gas explosions.
In 2001, the Health and Safety Executive introduced a compulsory requirement for gas distribution companies, such as the appellant, to update and improve its networks of iron pipes (the 30/30 Programme) because it required the replacement or improvement, over a 30-year period, of “at risk” mains pipelines located within 30 metres of a building. Following its acquisition of the network, the appellant complied with that requirement by replacing certain of its iron pipes with high density polyethylene (HDPE) pipes or lining existing iron pipes with HDPE pipes.
An issue arose whether the appellant was entitled to land remediation relief (LRR) under schedule 22 of the Finance Act 2001 in respect of the expenditure on those works. If it was, it was entitled to a deduction of 150% of the relevant expenditure in computing its profits for corporation tax purposes. If it was not, the deduction was limited to 100% of the expenditure.
Both the First-tier Tribunal (FTT) and the Upper Tribunal (UT) concluded that the replacement of gas pipes required to prevent harm, or risk of harm, did not qualify for LRR as the appellant was responsible for piping the gas and so was deemed to be contaminating the land itself: [2020] UKFTT 101 (TC); [2021] UKUT 157 (TCC). The appellant appealed.
Held: The appeal was dismissed.
(1) It was common ground that the appellant was entitled to LRR if a number of specified conditions were met, including condition (6): “A company is not entitled to land remediation relief in respect of expenditure on land all or part of which is in a contaminated state, if the land is in that state wholly or partly as a result of anything done or omitted to be done at any time by the company or a person with a relevant connection to the company”: paragraph 12(1)(4) of schedule 22.
(2) The principle that “the polluter pays” was a broad general statement of policy. It was no substitute for the words of the Finance Act itself. Words and passages in a statute derived their meaning from their context. They were the words which parliament had chosen to enact as an expression of the purpose of the legislation and were therefore the primary source by which meaning was ascertained.
Thus, statutory interpretation was an exercise which required the court to identify the meaning borne by the words in question in the particular context. An appeal to a purposive interpretation of an enactment was of particular utility where there was no obvious meaning of the words that parliament had used but it still required the court to interpret the language that parliament had used. In the present case, the words used by parliament left no room for doubt: IR Commrs v McGuckian [1997] 1 WLR 991, Pollen Estate Trustee Co Ltd v Revenue and Customs Commissioners [2013] EWCA Civ 753; [2013] PLSCS 146; [2013] 1 WLR 3785 and R v Secretary of State for the Environment ex p Spath Holme Ltd [2001] 2 AC 349; [2000] PLSCS 283 considered.
(3) Condition (6) was not satisfied if the land was in a contaminated state wholly or partly as a result of anything done or omitted to be done at any time by the appellant. Land was in a contaminated state if there was a possibility of harm. The purpose of LRR was to give relief against tax where there was expenditure on land which “is” in a contaminated state: paragraph 2(2) of schedule 22. That directed attention to the condition of the land at the date when the expenditure was incurred. That land must also have been in a contaminated state when it was acquired: paragraph 12(1)(b). So, one was required to consider the state of the land both at the date of acquisition and when the expenditure was incurred.
The use of the words “at any time” in paragraph 12(4) also meant that it was not correct to concentrate on the moment when the pipes were laid. On the facts found, the land was contaminated both at the date of acquisition and at the date when the expenditure was incurred because gas was being pumped through the iron pipes.
(4) The iron pipes themselves (whether or not corroded) did not give rise to any harm. The possibility of harm being caused arose because the appellant and its predecessor had pumped gas through them. If no gas had been pumped, the land would not have been contaminated. The appellant had continued to do that since it acquired the land; and it was the continuing pumping of the gas through the pipes that gave rise to the need for the works. The reason why the land “is” contaminated was the appellant’s continued pumping of the gas. That was an “act” of the appellant which gave rise to (or caused) the contamination.
Even on the appellant’s argument it was continuing the contamination that existed when it acquired the land. The facts of this case were quite different from a factual situation in which land was contaminated at the time of its acquisition and the new owner simply did nothing for a while. That was a situation in which the new owner was passive in the face of existing contamination, as opposed to a situation where the new owner actively perpetuated the contamination.
An appeal to the principle that “the polluter pays” was of no real help to the appellant. On the findings of the FTT it was not unfair to describe the appellant as the polluter, since the contamination would not exist but for its pumping the gas. Because the appellant failed to satisfy condition (6), the appeal failed.
Jonathan Peacock QC, Nikhil Mehta and Sarah Black (instructed by Enyo Law LLP) appeared for the appellant; David Yates QC (instructed by HMRC Solicitor’s Office) appeared for the respondent.
Eileen O’Grady, barrister
