Land Remediation Relief

Key points:

• Costs incurred in restoring contaminated/derelict land may qualify for enhanced tax relief.
• The relief is equal to 150% of qualifying expenditure.
• Resulting losses can be surrendered for a cash credit.

What is Land Remediation Relief?

Land remediation is the process by which land resources are restored to their former state. Land Remediation Relief (“LRR”) is a Corporation Tax relief that has been around since 2001. It is often overlooked, despite it being quite a valuable tax relief.

LRR is only available to companies within the scope of Corporation Tax. Unlike capital allowances, it is available to property investors and developers alike. Where a company incurs costs in cleaning up land that was acquired from an unconnected third party in a contaminated state or has been long-term derelict, LRR allows the company to claim a deduction from its taxable profits equal to 150% of its qualifying expenditure.

For example, if a company incurs £100,000 of qualifying land remediation costs, it can claim a £150,000 deduction against its taxable profits. This being the original £100,000 plus an additional 50%.

A company that makes a loss because of the LRR claim, can surrender part of the loss that is attributable to the LRR in return for a cash payment.

Restrictions

If any of the following conditions are met, then the company is not eligible to claim LRR:

• The claimant company is responsible for the contaminated land.
• The claimant company does not have a major interest in the land (freehold or a minimum lease of 7 years).
• The expenditure has been subsidised (e.g. by grant funding).
• There was a significant discount on the acquisition cost of the land in order to account for the cost of the remediation works.

How can we help?

We can help assess your eligibility for a claim and guide you on the steps for claiming the relief within your Corporation Tax return.

If this is something you want to explore further, please contact us!