What is Land Remediation relief?
Land Remediation Relief (LRR) was introduced in 2001 and is a corporation tax relief available to companies (including non-resident landlord companies) that acquire contaminated or derelict land in the UK, for the purposes of their trade or UK property business.
It is often overlooked particularly by smaller property developers and investors.
Rates of relief
LRR is a relief from corporation tax only. It provides a deduction of 100%, plus an additional deduction of 50%, for qualifying expenditure incurred by companies in cleaning up land acquired from a third party in a contaminated state or in bringing long term derelict land back into use.
Relief can be available on developments, regeneration projects, fit-outs and refurbishments. The time limit for retrospective claims is up to 3 years.
The actual rate of relief that can be secured depends upon the status of the company claiming the relief, summarised below:
OWNER OCCUPIER / INVESTOR RATE
FOR LOSS MAKING COMPANIES A TAX CREDIT
(CASH IN HAND) CAN BE CLAIMED
When can it be claimed?
LRR can provide tax relief in all commercial property sectors where companies are subject to corporation tax. Unlike capital allowances, LRR is available to property investors and developers alike.
Some of the main conditions necessary to claim LRR are:
• The land is not in a contaminated state due to the claimant company.
• The claimant company has a ‘major interest’ (freehold or a minimum lease of seven years) in the relevant land.
• The expenditure has not been subsidised, for example by grant funding.
• The acquisition cost of the land was specifically discounted to account for the cost of remediation works and stated as such in the purchase agreement.
• In the case of derelict land, be out of productive use, and be incapable of being brought back into productive use unless buildings or structures on it are removed.
Qualifying costs include:
It is possible to make retrospective claims for LRR in respect of completed developments but there is a time limit of two years from the end of the year in which the expenditure was incurred.
Qualifying expenditure includes:
- Remediation of contaminated lands
- Breaking out buried structures
- Removal of asbestos contamination in soil & concrete
- Treatment of harmful organisms & naturally occurring contaminants
- Radon protection measures
- Japanese knotweed
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