Land Remediation Relief (LRR) is one of the most generous tax reliefs available for property and infrastructure developers. Despite this, it’s often overlooked by many businesses. Here, we explore the relief’s full benefits and how we can support you in preparing a claim to maximise your business’s cashflow.

What is the Land Remediation Relief Scheme?

LRR a relief on corporation tax of the capital expenditure incurred for cleaning up contaminated or derelict land. The relief aims to encourage the re-development of land blighted by contamination from previous industrial use.

Contaminated land is defined as land with something in, on or under the land, which causes ‘relevant harm’ or there is a serious possibility that ‘relevant harm’ will be caused. The tax relief is available for many decontamination solutions on both the land and buildings, as HMRC understand that there are multiple different methods of preventing, minimising, or mitigating the effects of relevant harm. Therefore, any costs incurred to change the condition of the land is an allowable expenditure, as well as the costs incurred to establish the level of contamination to start with. This includes the removal of contaminated soil and water, the treatment of harmful organisms, the removal of natural contaminants, and the removal and treatment of invasive plants.

Derelict land is defined as land out of productive use since 1 April 1998, that is only able to be bought back into productive use if buildings or structures on it are removed. Unlike expenditure on contaminated land, qualifying expenditure on derelict land is very specific. Qualifying expenditures include the removal of the following:

• Post-tensioned concrete heavyweight construction

• Building foundations and machinery bases

• Reinforced concrete pilecaps

• Reinforced concrete basements

• Below-ground redundant services

What are the benefits of Land Remediation Relief?

A claim for LRR reduces a company’s taxable profits by 150% of its qualifying expenditure, and a business can expect a cash benefit of 16% of the surrendered losses. But these rates are currently under review to confirm whether the scheme is supporting development and encouraging developers to take on more complex sites and bring them back into use. It is likely that going forward the scheme might be enhanced to support these objectives.

Who can claim Land Remediation Relief?

• The following conditions must be satisfied to claim LRR:

• The claimant company must have a freehold or lease of at least seven years

• The land must have been acquired by the claimant company for the purpose of its trade or property business

• At the time the claimant company acquired the land, all or part of the land must be in a contaminated or derelict state

• The claimant company must incur capital expenditure on qualifying remediation in respect of the land

• Expenditure must not be grant-funded or allowable under any other capital allowances

These requirements are also under review to understand whether the ownership requirements are too restrictive and therefore holding back development of these complex sites. We expect to see some changes in this aspect of the scheme, and will stay up-to-date with any amendments to ensure we are supporting you fully.

Land Remediation Relief qualifying expenditure

The following costs may qualify for relief:

• Employee costs: Costs for those directly and actively engaged in the relevant land remediation

• Materials costs: Items used directly in the remediation work

• Subcontractor costs: Payments to subcontractors

• Professional fees: Payments made for advice on how to remove the contamination

Early-stage costs assessing the site and developing the remediation plan can also be claimed. These might cover geotechnical and surveying costs. Therefore, it is worth checking at the start of any project what costs can be claimed. Leaving it until the on-site work has started may be too late.

What are the deadlines for a Land Remediation Relief claim?

A company must make a claim for LRR in its tax return for the relevant accounting period. However, the claim can also be made in an amended return for the relevant accounting period, the time limit for the claim is the first anniversary of the filing date for the relevant company tax return.

A detailed report explaining the contamination and expected work is required for a successful claim. This needs input from the technical teams within your business. Our team of experienced Real Estate and corporation tax specialists can help with extracting the information that HMRC requires for a robust claim.

How we can help

Although Land Remediation Relief can be an essential source of much needed cash, we find that many businesses need to be made aware of what costs are eligible, or they overlook the scheme completely. It is not straightforward to ensure the required conditions are met, or to distinguish between qualifying and non-qualifying expenditure. As a result, we often see mistakes in LRR claims where the claim may be missing expenditure that could be rightfully claimed, or claims where costs are included that aren’t qualifying.

If you’re unsure where your expenses would qualify for Land Remediation Relief, our specialist advisors can help you evaluate eligibility and help you build a robust claim.

We'll work closely with you to gather all the necessary information and documentation to support your claim. Our team will then prepare a detailed report that outlines the nature and extent of the contamination. The report will also outline the work undertaken to decontaminate, as well as the costs associated with remediation. We have a thorough understanding of the Land Remediation Relief regulations and can guide you through the process from start to finish.

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