Following recent changes to Stamp Duty Land Tax legislation property developers are searching for alternative tax reliefs. Land Remediation Relief (LRR) offers a big incentive to all limited company developers that bring contaminated and derelict land back to productive use.
Introduced in 2001 and redesigned in 2009, LRR offers a relief on Corporation Tax equal to 150% of the qualifying expenditure that was incurred in the cleaning up of acquired land. LRR is only available to Limited companies on acquired sites and certain exceptions apply.
Land is classed as contaminated when:
‘Relevant harm’ refers to contamination that could have significant adverse impact on humans or animals, or cause damage to buildings, which has a real impact on the way they can be used.
Land contamination must be present as a result of industrial activity, such as:
However, the site itself doesn’t necessarily need to have been used for industrial activity. For example, removal of asbestos from a former shop or restaurant can be claimed for if the issue was present due to the construction of the physical building.
LRR is only available if remedial work is undertaken and claims can be made up to two years after the company year-end date.
Land is classed as derelict when:
As with the above, LRR is not available if the remedial work is not undertaken. Relief can be claimed on both revenue expenditure and capital expenditure, and be made up to six years after the year in which the expenditure is incurred.
If contamination isn’t caused by industrial activity then there can only be three other specific contributing factors:
Close relatives of any of the above do not qualify for LRR.
This is the only type of contamination which does not have to be present at the time of land acquisition in order for it to qualify for LRR. It could be fly tipped or natural germination, yet any costs of disposing of knotweed to landfill will not qualify for relief.
If knotweed is left on the land for any length of time then the owner will become the polluter. The polluter cannot then claim LRR unless it has paid for specialist advice and they have advised to leave the knotweed until a certain time, for example, the summertime when it grows and can be properly removed.
Costs to claim
Companies are eligible to claim any expenditure that has increased due to site contamination or has been borne by this issue. For example, appointing contractors to clear asbestos, higher security perimeter fencing to stop people from entering the site, additional waste costs if contaminated matter can’t go to landfill as well as additional desk studies over and above the original site searches studies. Costs can also be claimed for clearing any land adjoining the site or controlled waters.
Remember, any expenditure incurred before the first day of trading is treated as incurred on the first day of trading.
Our expert advisors can help with writing reports and identifying relevant qualifying expenditure. To see what LRR you could claim contact David Herd at David.Herd@championgroup.co.uk or on 0161 703 2500.
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