Land Remediation Relief can help ‘clean up’ your land for productive use

Category: Property & Construction - Posted On: Aug 12 2020


For those in the construction sector, the COVID pandemic has quickly become the number one issue in the world, meaning the environmental crisis has slid down the agenda – but can part of the solution to one crisis help the other?

With the environment and cash flow in mind, the development of industrial land, known as brownfield sites, is preferred to greenfield sites, which is usually agricultural or amenity land.

Brownfield sites are often eligible for Land Remediation Relief (LRR), which is a corporation tax relief. LRR provides a deduction of 100%, plus an additional deduction of 50% for qualifying expenditure incurred by companies in cleaning up land acquired from a third party in a contaminated state (as a result of industrial activity) or in bringing long term derelict land back in to use.

The main conditions of LRR are:

  • The land is not in a contaminated state due to the claimant company
  • The claimant company has a ‘major interest’ in the relevant land
  • The expenditure has not been subsidised, for example grant funding
  • The acquisition cost of the land was specifically discounted to account for the cost of remediation works and stated as such in the purchase agreement.

To be derelict, the land must be out of productive use, and be incapable of being brought back into productive use unless buildings or structures on it are removed.

To count as long-term derelict land, the land must have been derelict since 1 April 1998 or when the site was acquired by the claimant company, or a connected party.

LRR is available to both property investors and developers at the following rates:

  • Developers – 50%
  • Owner occupier/investor rate – 150%
  • For loss making companies a tax credit can be claimed – 24%.
Tax saving on qualifying costs of £100,000 
Developer tax saving £28,500 saved rather than the standard £19,000 corporation tax saved (50% uplift x 19% corporation tax relief)
Owner occupier £28,500 rather than nil (relief turns a capital cost into a revenue deductible cost)
Loss making company £24,000 repayable tax credit for both owner occupier and developers

Qualifying costs include:

  • Employee costs – required as part of the remediation work
  • Materials used over and above standard issued items because of the contamination
  • Sub-contractor and professional fees.

If contamination has not been caused by industrial action, costs in relation to cleaning up Japanese knotweed, Arsenic and Radon can be claimed and it is possible to make retrospective claims up to 3 years.

Our EQ Property and Construction team can support you with maximising your Land Remediation Relief claim, for more information please email our team at property@eqaccountants.co.uk or contact one of our offices.