On 24 September 2026, the Chartered Institute of Taxation (CIOT) submitted a formal representation to HM Treasury urging primary legislation to allow tax deduction for pre-development costs incurred on projects that do not proceed to construction. Under current rules (ITTOIA 2005 / CTA 2009), expenditure on feasibility studies, design, and planning applications is only deductible if the trade ‘commences’—typically defined as the start of physical construction. Abortive project costs are treated as capital and non-deductible, creating a significant tax disincentive for speculative development and innovation in the construction and infrastructure sectors.
Key Takeaways
- Abortive Cost Crisis: CIOT estimates £2.3bn per annum in abortive pre-development expenditure across UK property and infrastructure sectors receives no tax relief, disproportionately affecting SME developers and innovative construction methods.
- International Benchmark: The UK is an outlier among G7 nations; the US (Section 195), Germany (§ 4 EStG), and France (Article 39 CGI) all allow deduction of abortive project costs under defined conditions.
- Proposed Solution: CIOT recommends a targeted ‘pre-trading expenditure’ regime allowing deduction over 5 years from the date the project is formally abandoned, subject to a ‘commercial rationale’ test to prevent abuse.
Disclaimer: This article is compiled and summarized by the AI based on publicly available information and is for general information purposes only. It does not constitute any form of formal tax advice, legal opinion, or basis for performance. Please consult a qualified professional tax advisor or legal counsel for tax advice.
Source: Read Official Announcement