Tax relief for cleaning up contaminated land and buildings

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Cleaning up contaminated land and buildings can represent a major cost for developers, putting into question the viability of a scheme. There is, however, a valuable tax relief for developers who take on the challenge.

In 2001, the Government introduced Land Remediation Relief to encourage the decontamination and redevelopment of industrial land and buildings. It means that a business can claim Corporation Tax relief of 150% on the costs incurred. It is a relief that is little understood or used.

There are, as you might expect, strict criteria that must be met.

What qualifies for Land Remediation Relief?

Land and buildings are considered contaminated if, because of industrial activity, there is contamination present which could cause harm. The tax relief is available for several decontamination measures on both land and buildings.

This includes the removal of contaminated soil and water, the treatment of harmful organisms, the removal of natural contaminants (for example, radon and arsenic), the removal of buried structures, and the removal and treatment of invasive plants such as Japanese Knotweed.

The relief is also available for the removal of asbestos from buildings, post-tensioned concrete, building and machinery foundations, below ground redundant services, and reinforced concrete basements.

To qualify, land must meet the Government’s definition of ‘causing harm’. This includes the ‘serious possibility of causing harm’ and extends to groundwater, steams, rivers and coastal waters. The land must be in the UK and been acquired with the purpose of business or trade.

The relief can be applied to preparatory activities, including consultancy fees and lab investigations, to plant and machinery, employment and labour costs, and on sub-contractor costs.

When can Land Remediation Relief not be claimed?

The relief cannot be claimed if the decontamination costs are subsidised by, for example, grant funding, or if the land was purchased at a discount because of its contamination. There is also a time limit of three years for a claim.

How much is Land Remediation Relief worth?

Land Remediation Relief is a potentially valuable relief for developers, reducing taxable profits by 150% and surrendering losses for a tax credit of 16%.

Developers considering a scheme with potential contamination of buildings or land should explore this relief and factor that in to the scheme’s overall viability.

To find out if your project qualifies for Land Remediation Relief, contact Tax Director, Beverley Wood on 01908 713880 or beverley.wood@hhllp.co.uk.