Land Remediation Relief: getting corporation tax relief
When buying contaminated or derelict land as a company, you can apply for relief from corporation tax to offset the costs of treating the land. It was previously unclear what remedial work qualified, but new guidance has been issued to help companies maximise their gains.
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What is Land Remediation Relief?
Land Remediation Relief is for companies buying contaminated or derelict land. It lets them reclaim the money spent on clean-up. This relief applies if the contamination wasn't their fault, the costs were necessary due to the contamination, and other conditions are met.
What qualifies for Land Remediation Relief?
Contamination due to prior industrial activity on the site
Asbestos remedial work
Waste from soil heaps, factories, tanneries, metal works, or sulphate attacks to concrete
Remedying Infilled land e.g. mining shafts or quarries
Treatment and removal of Japanese knotweed
Removal of natural contaminants, like radon or arsenic
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Land remediation examples
01
Example 1:
Company A buys land that was previously a petrol station. Some land is contaminated due to the underground tanks leaking while the petrol station was in use. Company A hires a specialist to treat and remove the oil spill for £25,000. Because the leak was not caused by Company A, they are granted Land Remediation Relief.
Company A gets 100% of the qualifying expenditure offset (£25,000) plus 50% against Corporation Tax for the qualifying expenditure. This is claimed via the tax return for the accounting period it was spent.
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Example 2:
Company B buys land where a factory was just demolished. During demolition, it was found that dyes from the factory had leached into the ground. When Company B purchased the land, they received a discount due to the known remedial works that would be required on the land.
Company B does not qualify for Land Remediation Relief as they have already received a subsidy to pay for the remedial work required.
- What is NOT eligible for Land Remediation Relief?
- Cleaning up nuclear sites
- Contamination or dereliction that has been caused by the company
- Contamination that has been caused by a tenant
- What costs qualify for Land Remediation Relief?
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Staffing and administration costs
If the costs are not already subsidised e.g., via grant funding or a reduced purchase price -
Material costs
If the costs are not already incurred on landfill tax -
Contracts and subcontracts delivering remedial work
If the costs are not otherwise required for the development of the land e.g., if the land had not been contaminated or derelict, the remedial work would still be required
Claiming Land Remediation Tax Relief
When a company qualifies for Land Remediation Relief on land they own, they can get the full costs offset (100%), plus an additional deduction of 50% against corporation tax for qualifying expenditure.
There are two ways to claim Land Remediation Relief:
- Reducing taxable profits of qualifying expenditure by 150%
- Surrendering losses for a tax credit at 16% (a cash return of 24% of qualifying expenditure
Claims must be made in the self-assessment tax return. Retrospective claims can be made up to 4 years later.
Claims can only be made for qualifying expenditure in the accounting year it occurred, however, you can submit a retrospective claim up to 4 years after the development has been completed.
Example 1: A Company hires a specialist to remove contamination on a site in 2021. Two years later, the development is completed and the properties are sold. The expenditure can only be claimed against the tax year it was spent (2021-22). The Land Remediation Relief claim can be submitted up to 4 years after the development has been completed.
Submitting a claim for the wrong accounting period (after the expenditure took place) without following generally accepted accounting practice (GAAP) will result in a rejection.
Retrospective claims submitted more than 4 years after the development has been completed will fail.
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Client reviews
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Common questions about Land Remediation Relief
You can get tax relief when Japanese Knotweed is found on your land or if it has appeared at a later date due to fly-tipping on the site. To qualify for the relief, you can’t have already received a discount on the land due to the presence of Japanese knotweed. You also should have acted promptly to control the spread once you became aware of it to be eligible to reclaim the costs.
Land Remediation relief is a tax relief that companies can apply for to treat contaminated land. You can apply for Land Remediation Relief on any qualifying expenditure to treat Japanese knotweed. For example, the hiring of a specialist to remove the infestation.
Land Remediation Relief is not usually granted for the removal of any other living organisms. For example, animal droppings, decaying matter on burial sites, or hydrocarbons. However, special concessions are granted to Japanese Knotweed because of how it can appear due to no fault of the landowner.
You can get Land Remediation Relief if you need to remove asbestos on land you’ve purchased. You can only apply for relief if you are a company developing the land and if the asbestos was not caused by you. When Land Remediation Relief is granted, you should be able to get 100% of the costs of removing the asbestos offset on your tax return, plus 50% against corporation tax for the expenditure.
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Fast, informative and successful!
Paul EdwardsI reached out to StampDuty.com in August to discuss a purchase I made last year.
The property was in a bad state of repair, lots needed doing. When StampDuty.com gathered the documents and images of the property, they let me know I could save roughly £40,000. This seemed amazing but i was sceptical, why didn't my lawyer point this out. After many reassuring conversations and pointing to legislation to explain their answers, we pushed ahead.
I am pleased to say I received my refund at the end of October! I just want to thank Joe and the team for all of their hard work and the fast turnaround.