Land Remediation Relief
REDS Environmental Consultancy recently compiled a briefing note on the Land Remediation Relief (LRR) tax incentive offered by the UK government. This incentive is designed to encourage the redevelopment of brownfield and contaminated sites.
In this article, we explain the key benefits of Land Remediation Relief, answer common FAQs, and highlight how REDS can support developers in maximising tax savings while contributing to sustainable land development.
What is Land Remediation Relief?
First introduced in 2001, Land Remediation Relief is a generous tax incentive to encourage the clean-up of brownfield and contaminated sites and bring long-term derelict land back into economic use for commercial property.
Despite being available for over 20 years, this potentially valuable incentive is too often overlooked. The relief could be available on any site where contamination is present from historic industrial activity, but also some naturally occurring substances (e.g. radon, arsenic) could be eligible, which could even include less developed sites.
FAQs
What is contamination?
Land and buildings are deemed to be ‘contaminated’ if there is contamination present which could cause ‘relevant harm’.
Who can claim Land Remediation Relief?
Commercial property investors and developers can claim tax relief on qualifying expenditures associated with the decontamination of land and buildings that have been acquired from a third party.
What Land Remediation Relief is available?
Land Remediation Relief provides a deduction of 100% plus an additional deduction of 50% (in the event that qualifying land is purchased in a contaminated state) against corporation tax for qualifying expenditure. A business can claim Land Remediation Relief either by reducing taxable profits by (up to) 150% of its qualifying expenditure or by surrendering losses for a tax credit at 16% (This is a cash return of 16%-24% of qualifying expenditure).
What would class as Qualifying Expenditure?
Tax relief is available for a range of decontamination activities. 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, building and machinery foundations, below-ground redundant services, and reinforced concrete basements. Other qualifying activities could include consultancy fees associated with the site investigation, risk assessments, and regulatory liaison, laboratory analysis costs, capital expenditure (including the cost of plant and machinery) and sub-contractor costs.
Conditions
To qualify for the relief, money must have been spent land in the UK on land that is contaminated (defined as ‘causing harm’, ‘has the serious possibility of causing harm’, or ‘is causing or has the possibility of causing harm to groundwater, streams, rivers and coastal waters’.). The land must have been acquired by the business for the purpose of its trade or business and the cost of remediation would not have been incurred if the land was not contaminated.
Exclusions
The relief does come with exclusions. The contamination must not have been caused by the claiming company. The expenditure for decontamination must not have been subsidised (e.g. grant funding) and the acquisition cost of the land cannot have been discounted because of the contamination present.
Time limits to make a Land Remediation Relief claim
Claims must be made within 2 years of the end of the accounting period in which the expenditure occurred.
How can REDS help you?
REDS can offer a complete land remediation service to developers investing in brownfield and contaminated sites. By undertaking all site assessment, risk assessment and remedial activities in-house, we are able to provide a simple break-down of Land Remediation Relief qualifying activity expenditure to our clients. This allows for easy and effective application for relief to HMRC. REDS Environmental Consultancy holds £5M Professional Indemnity insurance and extensive experience in the investigation, assessment and remediation of contaminated soil and groundwater. The consultancy undertakes all aspects of contaminated land risk management, including initial environmental appraisals, geoenvironmental site investigations, risk assessments, and remediation of soil and groundwater. We offer pragmatic, commercially focused solutions and have an excellent track record with the discharge of planning conditions and management of contamination liability. The environmental consultancy works with all divisions within REDS in the delivery of remediation strategies. Demolition of buildings, site clearance, below-ground tank or foundation removal and excavation work required as part of required site remediation is also delivered by our specialist decommissioning and engineering divisions.
