Land remediation relief (LRR) is quite often overlooked particularly by smaller property developers and investors. It is a valuable relief, and the claiming of it, is actively encouraged by HMRC.
By way of background, LRR was introduced in 2001 to address market failure, in bringing back into use, land that had been blighted by previous use for industrial purposes. In 2009, the relief was extended to address market failure in bringing long term derelict land back into use.
Although both LRR for land in a contaminated state and LRR for derelict land are intended to help bring land back into productive use, they naturally deal with different issues. Some of the main conditions necessary to claim LRR are:
- The land is not in a contaminated state due to the claimant company
- The claimant company has a ‘major interest’ (freehold or a minimum lease of seven years) in the relevant land
- The expenditure has not been subsidised, for example by grant funding
- The acquisition cost of the land was specifically discounted to account for the cost of remediation works and stated as such in the purchase agreement
- In the case of derelict land, be out of productive use, and be incapable of being brought back into productive use unless buildings or structures on it are removed.
It is possible to make retrospective claims for LRR in respect of completed developments but there is a time limit of two years from the end of the year in which the expenditure was incurred. Qualifying expenditure includes:
- Removal of Asbestos Sulphate contamination in soil and concrete
- Japanese knotweed
- Radon protection measures
- Removing building foundations and machinery bases, reinforced pile caps or below ground redundant services.
LRR is a relief from corporation tax only. It provides a deduction of 100%, plus an additional deduction of 50%, for qualifying expenditure incurred by companies in cleaning up land acquired from a third party in a contaminated state or in bringing long term derelict land back into use. The actual rate of relief that can be secured depends upon the status of the company claiming the relief, summarised below:
- Owner occupier/investor rate – 150%
- Developer rate – 50%
- For loss making companies a tax credit (cash in hand) can be claimed – 24%.
The above information illustrates how beneficial a claim for LRR can be to a business. To discuss your position or to find out more contact Tom Penman.