Contaminated land remediation – are you missing out on tax relief?
Land Remediation Relief, or Contaminated Land Tax Relief, allows businesses to claim relief of 150% of the cost in cleaning up the site, against their corporation tax bill.
It was introduced 15 years ago, in an attempt to utilise commercial land rather than developing on greenbelt. Despite being around for more than a decade, there’s still the perception that it is only available to land, however the conditions apply for buildings in the same way.
To be eligible, the land or building must be owned by a limited company at the time that the remediation is undertaken. The land or building must be owned either as a freehold or as leasehold with at least a seven year term at inception.
Broadly speaking, to qualify for relief there must be a possibility of ‘serious harm’ to persons and the environment, ‘damage’ to buildings, or pollution to water courses.
Common examples of qualifying contamination and measures to remove or mitigate the risks are as follows:
- Asbestos e.g. roofing panels – complete removal or capping / encapsulating qualifies
- Sulphate contamination in soil and concrete
- Hydrocarbon contamination e.g. fuels, oils etc or dealing with disused tanks
- Any pollution from previous industrial activity e.g. heavy metal contaminants from industrial processes
- Ground / landfill gases – any protection measures e.g. membranes / ventilation systems required in buildings or foundations
- Japanese Knotweed
- Radon protection measures
- Removal of redundant utility services and concrete foundations on sites or part of sites derelict since April 1998
To qualify for the tax relief, the money must be spent on the remediation of the land, some examples of qualifying costs may include: excavations, surveys, soil / groundwater treatment to scope out remediation process; staff wages & employers NIC where more than 20% of employee time spent on remediation; materials directly employed in the remediation; payments to sub-contractors directly engaged in the remediation.
It is possible to make retrospective claims, as long as the expenditure was incurred within two years from the year end when the expenditure was incurred. Loss making companies are able to claim with a tax credit paid by HMRC in return for a surrender of losses. Where remediation works are still held as work in progress the relief can only be claimed when the land or buildings. The upside to this is that a claim can still be made potentially years after the qualifying expenditure was incurred.
In a recent case, we had a client who purchased a commercial building, which was going to serve at its new HQ. The property was purchased by the company, and required approximately £250,000 of works to remove asbestos roof panels and remediate sulphate issues in the concrete structure of the building.
The client was able to offset the £250,000 spend against their corporation tax bill. In this instance, the client benefitted from an immediate corporation tax saving of £71k due to the whole of the £250k and a 50% uplift being offset against profits at the current corporation tax rate of 19%.
Whilst the tax relief which is available is generous, claims must be properly presented to ensure they meet the requirements of HMRC. HMRC review all claims carefully, therefore it’s essential to seek advice from experienced tax advisers, who are familiar with the criteria and process.
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