Tax relief

There are many different tax reliefs available but you need to know about them to make sure that you receive the benefit. A lesser known tax relief is ‘Land Remediation Relief” which I thought I would briefly outline to help make landlords, builders, architects and others who may be able to benefit either themselves or their clients from this tax relief.

Aim of the legislation

Land remediation relief was introduced in 2001 to help bring land back into use which had been damaged by use for industrial purposes and more recently 1 April 2009 extended to include long term derelict land when brought back into use. The relief applies to capital and revenue expenditure. The land does not need to be both derelict and contaminated to qualify.

Outline

The relief is a relief from corporation tax only. It provides for the deduction of 100%, plus an additional deduction of 50%, for qualifying expenditure incurred by companies bringing long term derelict land back into use or cleaning up land acquired from a third party that is in a contaminated state as a result of a former industrial activity.

Also because they may represent a significant obstacle to redevelopment land remediation relief is also available for the removal of contamination arising from:

• Naturally occurring arsenic and arsenic compounds;
• Radon; and
• Japanese knot weed.

Contaminated state

Land or buildings are considered in a contaminated state where:

• it is causing relevant harm; or
• there is a serious possibility it could cause relevant harm, or
• it is causing, or there is a serious possibility that it could cause, significant pollution in the ground water, streams, rivers or coastal waters.

‘Relevant harm’ – includes significant adverse impact on the health of humans or animals or damage to buildings that has a real impact on the way the building is used, an example would be asbestos.

‘Qualifying expenditure’ – includes the cost of establishing the level of contamination, removing the contamination or containing it so that the possibility of relevant harm is removed. There is however no relief if the remediation work is not carried out.

‘Industrial activities’ – includes but is not limited to:

• Mining and quarrying;
• Manufacturing;
• Supply of electricity, gas and water; or
• Construction industry.

The requirement that contamination is from industrial activity does not mean that the site must have been used in a industrial activity only that the contamination is a result of the activity, i.e. asbestos present in a building used as a shop is a result of the industrial activity of the construction industry.

Claiming the relief

A tax computation reflecting the claim and submitted in time is sufficient to make the claim. The 50% additional relief is given in the same period as the actual expenditure is charged to the profit and loss account.

An election to treat capital expenditure as a deduction in arriving at the profits must be made within two years of the end of the accounting period.

A company that makes a loss can surrender that part of the loss that is attributable to Land Remediation Relief in return for a cash payment (a tax credit) from the Government. A claim for a land remediation tax credit must be made in a CT self-assessment or amended self-assessment.

Conclusion

There is obviously so much more to this and my advice as always is if you think this may be something your company may be entitled to then seek professional advice first. But for more detail please see references below.

References

FA01/Sch22

CTA09/Part 14

CIRD60000