Tax Saving Opportunity -Land Remediation Relief (LRR)
Since 2001 companies have been able to claim tax relief on the remediation of contaminated land or buildings on 150% of qualifying expenditure. The relief has received comparatively little press coverage and, as a result, there have probably been many missed opportunities. Whilst the removal of asbestos is perhaps the most obvious type of qualifying expenditure LRR is a much broader relief than that and can include the remediation of anything which causes “harm” to living organisms on land or controlled waters. For example, the removal of Japanese Knotweed is now included.
As an example, 150% relief means that, if a company has spent £1,000 on qualifying expenditure, it gets a deduction from taxable profits as if it had spent £1,500. The expenditure does not have to be revenue expenditure in a company’s accounts; it can include items of a capital nature. A company paying the full rate of corporation tax (28%) could potentially save £420 (28% of £1,500) for every £1,000 of qualifying expenditure.
From 1st April 2009 LRR is extended to those companies bringing land that has been derelict since 1st April 1998 back into use; provided it was derelict when it was acquired by the claimant. This new relief recognises this extended definition of contaminated land and will be available for qualifying costs on the removal of specific items. It also includes the encapsulation of asbestos.
If claiming LRR creates or increases a loss, the resulting loss can be surrendered to the Revenue for a payment equal to 16% of the qualifying loss. This is equivalent to a 24% tax credit on the actual expenditure before the 150% uplift.
Provided that you are able to answer “Yes” to the following two questions, you may have a valid claim:
Is your business a company?
Was the land or property contaminated or derelict when you acquired it?
LRR is a highly specialist and complex area. The legislation is still fairly new and there are various conditions and anti-avoidance provisions. The benefits can be substantial although establishing a valid and optimum claim requires a high degree of skill and understanding.
If you want to discuss the planning opportunities in more detail please contact:-