What is Land Remediation Relief?

Land Remediation Relief (LRR) is a tax relief introduced by HMRC in 2001 with the legislation updated in 2009. It can provide relief in all property sectors, including residential and commercial developments and unlike Capital Allowances, is available to property investors and developers alike.

The basic principle behind the introduction was to incentivise the regeneration of brownfield land.

The relief is calculated differently depending on the trading entity and their accounting position. If the company is an owner occupier or investor, the relief is 150%. If they are a developer and the property is traded, the relief is 50% as all construction expenditure is fully written off to the profit and loss account (100%) already. Finally, if a company makes a loss in an accounting period, they can claim a credit of 24% of the qualifying expenditure incurred (16% of the 150% relief).

There is no explicit definition of contaminated land, but can generally be summarised as contamination resulted from an industrial activity that:

  • Causes “relevant” harm, and / or
  • Likely to cause “relevant” harm and / or
  • Naturally occurring pollution, such as
    • Japanese Knotweed
    • Radon
    • Arsenic

The industrial activities that cause contamination are far reaching, from construction industry to oil production and storage to pharmaceutical industry to chemical manufacture and many in-between. One of the most well-known contaminants that is overlooked for this relief is Asbestos, which causes “relevant” harm as a result of the construction industry.

There is a legal presumption that any non-domestic premises built before 2000 contain asbestos. Before doing any building, maintenance, demolition or other work a suitable and sufficient assessment for the presence of asbestos must be carried out. It is therefore essential that LRR is considered when works are carried out on any property built before 2000.

The costs that qualify for relief relate to, preventing, minimising, remedying or mitigating the effects of any relevant harm. A breakdown of these costs needs to be presented with a deduction made for any subsidised costs.

In order to be eligible for this relief, you cannot be the polluter of the land or have any direct commercial relationship with the polluter. You will also have to complete a corporation tax return, therefore excluding sole traders and partnerships.

For further information relating to LRR, please feel free to contact Iain Stamp on 01889 740405 or email iain.stamp@electca.co.uk for a free consultation.

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