What is Land Remediation Relief?

Introduced in 2001, and expanded in 2009, Land Remediation Relief is a generous corporation tax relief that allows for a deduction of up 150% of the spend on cleaning up on contaminated sites and buildings.

This relief is unique in that it is available for both property developers incurring revenue expenditure and owners, occupiers and investors incurring capital expenditure on construction projects. The 150% relief can be used to reduce a company’s tax bill or can create a cash credit for loss making companies.

Who Can Claim?

As above, both owners, occupiers and investors incurring capital expenditure and developers incurring revenue expenditure can claim, but they do claim differently:

Owner/Occupiers/Investors

Relief is claimed in the year you spend the qualifying expenditure. If missed, you have within 2 years of this period of expenditure to amend and claim in the return.

Property Developers

Relief is claimed when you sell the property, and your building stock is expensed. If missed, you have within 4 years of the end of this period the property.

What is Contamination for Land Remediation Relief purposes?

Land and building are deemed to be ‘contaminated’ because of industrial activity which would cause relevant harm. Relevant harm includes death or significant injury or damage to living organisms, water pollution, a significant adverse effect on the ecosystem, and structural or other significant damage to building or other property or interference that significantly compromises their use.

However, land cannot be contaminated because of the presence of living organisms or decaying matter deriving from them. The removal of burials or animals’ droppings does not qualify as ‘contamination’.

Here are some examples of types of contamination that could potentially qualify for land remediation tax relief under the UK's LRR scheme:

  • Asbestos
  • Hydrocarbons (e.g. petroleum, diesel, oil)
  • Pesticides and herbicides
  • Radioactive substances
  • Solvents (e.g. chlorinated solvents, white spirit)
  • Tar and bitumen
  • Chemicals (e.g. solvents, acids, alkalis)
  • Contaminated landfill
  • Cyanide
  • Japanese Knotweed

It's worth noting that these are just examples, and each case will depend on the specific circumstances of the land and the remediation work required. The UK government has published guidance on the types of qualifying land remediation activities and costs that are eligible for tax relief under the LRR scheme.

Qualifying Expenditure

There are also clear guidelines on what is considered qualifying expenditure in relation to claims, such as:

  • Preparatory activities, including consultancy fees, risk assessments, lab costs and regulatory liaison costs
  • Cost of Materials
  • Employment and Labour costs
  • Sub-contractor costs

    A more detailed breakdown of the above could be:

    • Costs associated with investigating and assessing the extent of contamination, such as surveys, soil and water sampling, and laboratory testing.
    • The costs of implementing a remediation plan, such as excavation, soil washing, or bioremediation.
    • The cost of materials used in remediation, such as treatment chemicals or absorbent materials.
    • The costs of removing and disposing of contaminated soil, water, or other materials.
    • The costs of monitoring the site before, during, and after remediation to ensure that contamination has been successfully removed.

It's again worth noting that this list is not exhaustive, and each case will depend on the specific circumstances of the land and the remediation work required.

Conditions for Qualification

The land must be in UK, acquired by the business for the purpose of its trade and business. The land must be contaminated, and the cost of clean-up would not have been incurred if the land was not contaminated.

The activities including consultancy fee, risk assessments, labour costs and regulatory liaison costs which are incurred as a form of preparation, and capital expenditure would be allowable expenditures for claiming additional benefit.

The acquisition cost must not be discounted due to contamination of the land. It has been suggested that where property is acquired at a reduced price because of contamination, any later expenditure on land remediation will be excluded. Also, if the contamination was caused by the claiming company, this relief will not be allowed.

Provided that the company and subcontractor are not related, the whole amount paid to the subcontractor will qualify for the deduction. If company and the subcontractor are related, the payment would only qualify if the expenditure incurred by the subcontractor is not subsidised.

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