Land Remediation Tax Relief entitles a company to claim an additional 50% tax relief on qualifying remediation expenditure as a trading expense, in the same year as the expenditure war incurred. This means that taxable profits are reduced, thus reducing the corporation tax liability of the company.
Their are several questions to be answered about land remediation tax relief, here are some of the key ones……
What is contaminated land?
Land is in a contaminated state only if there is something in, on or under the land which causes relevant harm, or if there is a serious possibility that relevant harm will be caused. Relevant harm can relate to:
Land is in a contaminated state only if there is something in, on or under the land which causes relevant harm, or if there is a serious possibility that relevant harm will be caused. Relevant harm can relate to:
Land is in a contaminated state only if there is something in, on or under the land which causes relevant harm, or if there is a serious possibility that relevant harm will be caused. Relevant harm can relate to:
- death of living organisms or significant injury or damage to
living organisms, - pollution of controlled waters,
- a generally adverse impact on the ecosystem, or
- structural or other significant damage to buildings or other structures or interference with buildings or other structures that significantly compromises their use. HMRC accept that the likelihood of relevant harm occurring varies according to the land use.
Is there a definition of contaminated land costs?
The general definition of contaminated land costs are those incurred in, ‘preventing, minimising, remedying or mitigating any harm or pollution of land or controlled waters, by reason of which the land is in a contaminated state, or restoring the land or controlled waters to their former state’.
What expenditure qualifies for Land Remediation Relief?
- staffing costs
- materials
- subcontracted costs incurred from both connected and non-connected companies
- professional fees incurred for advice on how to remediate the contaminated land.
Does the relief just apply to companies?
Yes! The relief is not available to individuals or partnerships. However, a company that is a member of a partnership can make an election in respect of its share of the partnership’s land remediation expenditure provided it satisfies the relevant criteria.
Are there any conditions to claim this tax relief?
The relevant conditions for relief are that:
- land in the UK is, or was, ac-quired by the company for the purposes of its trade or property business, and
- at the time the company acquired the land all, or part, of the land was in a contaminated or derelict state, and
- the company incurs revenue or capital expenditure on qualifying land remediation in respect of the land.
Are there any exclusions?
A claim for land remediation relief will not be possible
if the company:
- has already claimed capital allowances on the same expenditure
- is the original polluter if the site was purchased from a connected company which was the original polluter, no claim will be possible.
How do I claim and is there a time limit?
The accounting treatment determines when a company can claim land
remediation relief for revenue expenditure. A company can claim land remediation relief for qualifying revenue expenditure in the accounting period where the expenditure is deducted in calculating the profits. Many
property development companies will hold land as WIP in their accounts during the development of a site. Only when the remediation costs are released to the profit and loss Account will a claim for land remediation relief become available.The normal rules apply when amending a corporation tax return (i.e. within 12 months of the statu-tory filing date).
A company, carrying on a trade or property business, can also elect that capital expenditure on qualifying land remediation is allowed as a deduction in computing their taxable profits. The deduction is allowed in the tax computation for the accounting period in which the capital
expenditure is incurred.
Can I claim land remediation re-lief for bringing derelict land back into productive use?
Yes! For expenditure incurred on or after 1st April 2009,relief is available for expenditure incurred in bringing derelict land back into use. What constitutes derelict land is dependent on several factors. It must also be noted that to claim land remediation relief, the land must be derelict at acquisition.
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