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Tax relief for developers who regenerate derelict brownfield sites will be retained, after a last-minute U-turn by the government.

The Treasury said today that it had decided to retain the tax relief, worth 拢40m a year, which had been originally introduced by Gordon Brown as chancellor in 2001.

The decision follows a concerted campaign by developers and regeneration bodies to retain the tax relief, after chancellor George Osborne pledged to remove it in the March budget.

According to the Treasury 1,300 companies claim this relief each year, which was designed to provide an incentive for developers to spend money bringing land contaminated by previous uses or ex-industrial structures back in to use. The relief gave 150% deduction from corporation tax for any expenditure incurred by companies in cleaning up land in a contaminated state.

Developers had claimed that removal of the relief would make regeneration schemes on brownfield sites unviable, particularly if the sites had been purchased before the tax relief was abolished.

The Treasury admitted today that removing the relief would 鈥渞isk undermining the government鈥檚 plans to support the housing and construction sectors through planning reforms and the release of large areas of publicly owned land for development.鈥�

A statement on the Treasury website said: 鈥淭he government has therefore decided not to abolish this relief.鈥�

Ben de Waal, head of residential at consultant Davis Langdon, said: 鈥淭his is excellent news for the housing sector as it is for all those companies engaged in the remediation of contaminated and derelict sites. It also sends out a clear message that the government still supports the brownfield agenda and is committed to using tax incentives to support policy objectives.鈥�