What is Land Remediation Relief?
Land Remediation Relief is a specific form of tax relief designed to offset Corporation Tax. It applies to costs borne by companies in rehabilitating land acquired from another entity, which is either contaminated or in a state of dereliction.
This relief allows for a 150% (owner occupier/investor rate) deduction against Corporation Tax for eligible costs. Businesses can access Land Remediation Relief in two ways:
Reducing their taxable income by 150% of the expenditure that qualifies, or
Converting losses into a 16% tax credit.
In monetary terms, this equates to a cash return of 24% on qualifying expenses.
Definition of Contamination
Land and buildings are categorised as ‘contaminated’ when industrial actions have led to the presence of harmful substances, resulting in ‘relevant harm’. A wide array of decontamination activities, both for land and structures, are covered under this relief. This encompasses the elimination of tainted soil and water, the eradication of harmful organisms, and the removal of natural contaminants. It also includes the extraction of embedded structures and the treatment of invasive flora like Japanese Knotweed.
Criteria
Naturally, certain conditions must be met to qualify for this relief:
- The land must be causing or have a significant risk of causing harm as per Government definitions. This also extends to any negative impact on groundwater, rivers, and coastal waters;
- The contaminated land must be within the UK;
- The business must have acquired the land for commercial or trade purposes, and
- Remediation costs would not exist if the land was not tainted.
The relief clearly defines what constitutes eligible expenses, which include:
- Preliminary tasks, such as consultancy, risk assessments, lab testing, and regulatory interactions;
- Capital expenses, for example, plant and machinery;
- Labour and employment charges, and
- Costs related to sub-contracting work.
Frequently Asked Questions
Land Remediation Relief is a tax relief available to companies in the UK that incur costs rectifying contaminated land or derelict sites. It allows businesses to claim up to 150% of qualifying expenditure against their taxable profits, providing a significant incentive for property developers and businesses involved in land remediation.
Only companies paying UK Corporation Tax can claim Land Remediation Relief. This includes property developers, investors, and businesses that own contaminated or derelict land and incur costs cleaning or improving the land to a useable state.
Eligible contamination includes land that has been affected by industrial activities, pollution, or other harmful substances. Common examples include contamination from oil spills, heavy metals, asbestos, or other hazardous chemicals that affect soil or groundwater. Land that has been derelict for a long time may also qualify if certain conditions are met.
Qualifying costs include expenses directly related to cleaning up or mitigating the effects of contamination. These can include the removal of hazardous materials, treatment of contaminated land or water, and activities to prevent further contamination. The costs of bringing long-term derelict land back into a useable condition may also qualify.
Land Remediation Relief allows companies to claim 100% of the qualifying remediation costs, plus an additional 50%, meaning you can claim a total of 150% of the eligible expenditure. This can be set against your company’s taxable profits, potentially resulting in a tax refund.
