Land Remediation Relief (LRR) incentivises companies to bring contaminated land back into use by providing a generous tax credit for qualifying expenditure.
The relief was introduced in 2001 and received a significant overhaul in 2009 before narrowly avoiding being repealed during the Office for Tax Simplification’s cull of unloved tax reliefs in 2011.
LRR is available to companies within a charge to corporation tax (including REITs) and provides an enhanced tax deduction equal to 150% of the qualifying expenditure which includes capitalised works.
The scheme operates under two guises:
LRR for Land in a Contaminated State
Land is deemed to be in a ‘contaminated state’ if, as a result of industrial activity, there is contamination which is causing (or could cause) harm to animals, humans or the building itself as well as groundwater, streams, rivers or coastal waters.
In addition to (potential) contamination from industrial activity the removal of naturally occurring arsenic, radon and Japanese Knotweed will also qualify for LRR under this section.
Qualifying expenditure will include assessment works and the actual costs of removing or containing the contamination. The company making the claim must not have caused the initial pollution or contamination.
LRR for Derelict Land
Land is deemed to be ‘derelict’ if it is out of productive use and incapable of being brought back to use without removing structures and buildings on it. The land must have been derelict from the earlier of when the company (or group) purchased the land and 1 April 1998.
Relief will be granted for expenditure relating to the removal of the following structures from a site:
- Post tensioned concrete heavyweight construction,
- Foundations and bases,
- Concrete pilecaps,
- Concrete basements, and
- Redundant underground services or utilities.
Importantly, a company that has a loss relating to LRR will be able to surrender that it to HMRC in return for a cash payment equal to 16% of the qualifying loss surrendered.
This generous, yet often overlooked relief will assist many investors, developers or owner-occupiers with the recovery of sunk costs on a site and may even ensure the viability of certain projects.