Land Remediation Relief (LRR) sometimes known as Contaminated Land Tax Relief, can provide tax relief in all commercial property sectors where businesses are subject to corporation tax.
Unlike capital allowances, LRR is available to both property investors and developers.
It was introduced in 2009, in an attempt to utilise commercial land rather than developing on greenbelt. Despite being around for 20 years, there’s still the perception that it is only available to land, however the conditions apply for buildings in the same way.
The available reliefs are:
- Owner occupier/investor rate – 150%
- Developer rate – 50%
- Loss making companies can claim a tax credit – 24%
To be eligible, the land or building must be owned by a limited company at the time that the remediation is undertaken and the land or building must be owned either as a freehold or leasehold with at least a 7 year term at inception.
Broadly speaking, to qualify for relief the land or buildings must pose a possibility of ‘serious harm’ to persons and the environment, ‘damage’ to buildings, or pollution to water courses.
Common examples of qualifying contamination and measures to remove or mitigate the risks include:
- Asbestos e.g. roofing panels – complete removal or capping / encapsulating qualifies
- Sulphate contamination in soil and concrete
- Hydrocarbon contamination e.g. fuels, oils etc. or dealing with disused tanks
- Any pollution from previous industrial activity e.g. heavy metal contaminants from industrial processes
- Ground / landfill gases – any protection measures e.g. membranes / ventilation systems required in buildings or foundations
- Japanese Knotweed
- Radon protection measures
- Removal of redundant utility services and concrete foundations on sites or part of sites derelict since April 1998
To qualify for the tax relief, the money must be spent on the remediation of the land. Some examples of qualifying costs may include; Excavations, surveys, soil/groundwater treatment to scope out remediation process; staff wages & employers NIC where more than 20% of employee time is spent on remediation; materials directly employed in the remediation and payments to sub-contractors directly engaged in the remediation.
It is possible to make retrospective claims and the time limit for this is up to 3 years.
Cowgills had a client who purchased a commercial building, intended to serve at its new HQ. The property was purchased by the company, and required approximately £250k of works to remove asbestos roof panels and remediate sulphate issues in the concrete structure of the building.
The client was able to offset the £250k spend against their corporation tax bill and in turn benefitted from an immediate corporation tax saving of £71k due to the whole of the £250k and a 50% uplift being offset against profits at the corporation tax rate of 19%.
Whilst the tax relief which is available is generous, claims should be properly presented to ensure they meet the requirements of HMRC. HMRC review all claims carefully, therefore it’s essential to seek advice from experienced tax advisers, who are familiar with the criteria and process.