Jeremy King, construction specialist and partner at PricewaterhouseCoopers in the Midlands, looks at the role of the tax system in regenerating brownfield sites.
There has been an ongoing debate about how to increase brownfield development in the UK and the issue was put in the spotlight once again in Kate Barker's Government-backed review of the housing market. In the Midlands, we have seen some great success stories involving the development of brownfield sites, such as Birmingham Great Park and the Custard Factory.
Not only does it protect our diminishing greenbelt, but it can provide the catalyst for further development in areas that have fallen into a state of disrepair.
However, there are a number of barriers facing developers that discourage the development of brownfield land - largely to do with cost.
Firstly the land assembly costs involved in this kind of development are higher and secondly there can often be issues of land contamination to deal with (although there is tax relief to overcome this problem).
In addition the construction costs can also be higher and this is often due to the structure of the land.
All of these reasons, plus the complexities of the UK planning system are held up as the prime reasons for avoiding brownfield development.
So, is there any good news on the horizon? The Barker report has come in for some critcism due to its apparent lack of environmental consideration.
In the report Ms Barker delegates the environmental impact of her recommendations as a matter for the Government.
However, the report does contain an interesting proposal that could provide the impetus for further brownfield development.
The Government is proposing the introduction of a Derelict Land Tax Credit.
This was mooted in the pre Budget report in November 2003 and further endorsed by the Barker Review.
We are currently awaiting further details on how this will work in practice, but it is likely to be an extension to the existing Contaminated Land Tax Credit, which has been a successful incentive for developing polluted land.
This measure provides developers with tax relief for 150 per cent of the total clean up costs - a significant incentive, but also frustrating for developers who find much of the cost in brownfield development is concentrated around the structure of the land where there are currently no tax breaks.
So, any plans to extend tax relief to land which has lain derelict for some time would certainly open up the opportunities for development extensively.
This would be a significant step in the right direction in encouraging developers to look again at the possibilities of redeveloping and regenerating brownfield sites and can only be good news for our region.
Taking a trip down to Eastside in Birmingham shows the possibilities of what can be achieved when there is real determination and vision to bring an area back into economic use. There will always be some need for greenfield development - often brownfield sites just aren't in the right location.
However, it's not just a straight choice between these two options.
Developers also have the option of refurbishing existing buildings and this can play a significant role in regeneration.
However, the current rules on VAT are indirectly encouraging developers to tear down buildings and start again because the VAT on materials for new build is 0 per cent.
However, if a developer sought to bring a dilapidated building back to its former glory they would be charged 17.5 per cent VAT on all materials.
This is little incentive to preserve beautiful architecture and is certainly an area that requires further consideration.
Changes in the tax system could have a significant impact on the kind of regeneration projects that developers would view as economically viable.
If the Government is serious about its aim to encourage brownfield development, this must be backed up with substantial measures that will really provide incentives for developers.