Legal Updates
Land Remediation Tax Relief
Land Remediation Tax Relief (LRTR) gives enhanced tax relief for the costs of remediating contaminated or derelict land.
Companies can claim £150 tax relief for each £100 spent on clean up and remediation costs. LRTR is very valuable, particularly since these costs are often capital in nature and would not otherwise qualify for immediate tax relief. LRTR can make the difference between paying £100,000 with no tax relief, and paying £100,000 with tax relief of £42,000, so it only really costs £58,000.
Loss-making companies can surrender LRTR losses to the government, who will pay a Land Remediation Tax Credit at 16%. Expenditure of £100,000 will thus generate a tax credit of £24,000.
Recent changes, including the inclusion of derelict land, have made LRTR much more valuable. In addition, the government has now accepted that eradication of Japanese Knotweed has always qualified for LRTR, so if you have had Knotweed problems on sites in recent years an LRTR claim and a corporation tax repayment may now be possible. Please contact us for assistance with LRTR claims for Japanese Knotweed eradication and other cleanup costs. We may be able to advise on a "no claim no fee" basis.
Who can claim?
LRTR is restricted to companies, so partnerships and sole traders cannot claim the relief. In addition, the polluter of the land cannot claim.
What is contaminated land?
Land is contaminated if there are substances which could cause harm to human health, water pollution or damage to buildings or structures. Naturally occurring substances do not qualify, apart from Japanese Knotweed, arsenic and radon.
HMRC will now accept the results of a risk assessment submitted to the local planning authority as evidence of contamination.
What is covered by LRTR?
LRTR covers staff and material costs as well as payments to contractors incurred in remediating contaminated land. Remediation includes whatever is appropriate for the contamination in question, e.g. installing cover systems, in-ground barriers and cut-off walls, bio-remediation, removal to landfill (except for Japanese Knotweed), bio-remediation and cement based stabilisation.
Site surveys and risk assessments are also covered, though not initial desk top surveys.
Some work required by planning authorities, and work subsidies by others may not qualify.
The deal conundrum
Purchasers often want the seller to clean up the site so that they can buy it clean, but the seller may not be able to claim LRTR. This causes a tension in deals, but experience shows that the use of reputable clean up consultants and contractors and appropriate warranties and indemnities means that LRTR can be factored into deals, provided early advice is taken.
Japanese Knotweed
The position is different for costs incurred before and after April 09.
Before April 09, all eradication costs qualify for LRTR. After April 09, only bio-remediation qualifies, not "dig and dump", but claims are also possible if Japanese Knotweed has spread to a site after purchase.
Remediating derelict land
From April 09, LRTR is also available for remediating derelict land, i.e. land which is not in productive use and requires the removal of buildings or structures.
HMRC accept that land classified as derelict in the Scottish Vacant and Derelict Land Survey or the National Land Use Database will qualify as derelict for LRTR purposes, but other evidence can also be used. The land must have been derelict since 1998.
LRTR is available for the removal of post tensioned concrete heavyweight construction, building foundations and machinery bases, reinforced concrete pilecaps, reinforced concrete basements and below ground redundant services for gas, water, electricity and telecommunications.
How to make a claim
Companies can make a claim in their corporation tax return, or by amending the return if it has already been sent to HMRC. There are time limits, so early action is required, but HMRC can sometimes be persuaded to accept late claims
For further information please contact Isobel d'Inverno on 0131 656 0122 or at isobel.dinverno@brodies.com.
This material is for information purposes only and does not constitute any form of advice or recommendation by us. You should not rely upon it in making any decisions or taking or refraining from taking any action. If you would like us to advise you on any of the matters covered in this material, please contact one of the lawyers named above.
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