10 August 2021

Where there’s muck, there’s brass – land issues for developers could provide remediation relief

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Tax Reliefs (including R&D)

As land that is suitable for building projects becomes increasingly rare and harder to find, more developers are using previously developed, derelict or contaminated land. This kind of land often needs work done to remove potentially harmful materials before any new development can take place.

Peter Wright details when Land Remediation Relief applies to work carried out to return land to a workable state and how to make the most of this underutilised relief.


What is Remediation Relief?

This generous, yet underutilised relief could apply to many construction projects involving on contaminated and derelict land. Land Remediation Relief provides an extra deduction to corporation tax, there are three different rates at which this applies:

  • Owner occupier/investor rate – 150%
  • Developer rate – 50%
  • For loss making companies a tax credit (cash in hand) – 24%

Land issues that need to be fixed before it can be developed can often be expensive to resolve, you may have bought the land and then discovered there is a large amount of contamination to the land or asbestos in a building that needs to be removed and cleaned up before it can be demolished.

The rules can be complex so developers and investors should seek professional advice to assess your total outlay on the property and whether you may be eligible to make a claim via this scheme.

 

When to claim

Importantly it doesn’t matter whether you knew about these issues before you bought the land or if they came to light after the purchase. However there is a time limit of three years from the accounting period in which the expenditure occurred for retrospective claims.

That doesn’t mean there aren’t any stumbling blocks to claiming this relief. If the land was discounted specifically because of the issues you then went on to fix and reflected in the purchase agreement or the remediation work was subsidised (eg you were able to claim a grant because of contamination ) then you won’t be able to claim for the tax relief as well. It’s important to have all of the facts clear before you start to consider applying for Land Remediation Relief as only certain costs are considered to be ‘qualified expenditure’.

Examples of qualifying costs are:

  • Removal of naturally occurring contaminants including Japanese Knotweed
  • Removal of asbestos
  • Restoring polluted land to its original state
  • Excavating buried structures.
  • Installing a membrane or extra topsoil to prevent contaminants leaching through.

Understanding what applies

The expense of cleaning up land or removing asbestos from a building often ends up being included in a general cost of sale figure in end of year accounts meaning many examples of remediation work go unclaimed.

There are a variety of land issues that are potentially covered by this scheme including the removal and treatment of invasive plants. If you’ve bought an old garage or industrial site there could well be some kind of work that needs to happen before you can start developing the site. If it’s costing you money then you should consider claiming remediation relief. If you’re at all unclear about whether you can claim or not it’s worth asking the question of an adviser.

Even if you’re a loss-making company you can still claim for tax credits which is definitely worth considering. However with a complex scheme such as this and the knowledge required to determine eligibility for the relief it is highly recommended that professional advice is sought beforehand.

If you would like to advice on whether land remediation relief may apply to your business, get in touch.

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