On the Tenth day of Christmas the Taxman gave to me ….. cash back for making my property contaminate free!
Just when you were starting to think that these tax reliefs cannot surely continue, well, here we are with yet another gift from the taxman which comes to UK companies in the form of Land Remediation Relief.
The relief is targeted at companies that remediate their land and property from contamination including removal of asbestos from buildings, breaking-out buried structures in the land and the treatment of harmful organisms including naturally occurring contaminants such as Japanese Knotweed, radon and arsenic.
This tax relief is applicable to all UK companies that are subject to corporation tax and unlike Capital Allowances, Land Remediation Relief is available to both property investors and developers alike. The relief enables companies to reduce their taxable profits and make tangible cash savings. Companies that hold their property on their balance sheet can receive a deduction against their taxable profits of 150% of the capital expenditure and if the company has a tax loss for the year you can also surrender your land remediation expenditure for a cash rebate from HM Revenue & Customs at a rate of 16%. For both investors and developers, the cash return is equivalent to 24% of the expenditure incurred (16% x 150%). Please note that there is no minimum spend required by the company to qualify for the relief.
Relief can be available on any of the following types of transactions:
- Developments and regeneration projects
- Fit-outs and refurbishments
We recently advised a client who incurred £18,250 replacing an asbestos roof. We identified that £8,750 of this expenditure was in respect of the professional fees for identifying the asbestos, removing the roof and disposing of it. This amount qualified for land remediation relief and reduced the company’s corporation tax liability by £2,625 (£8,750 * 150% * 20%).
In order to benefit from this relief the qualifying conditions are as follows:
- The land / property must not have been contaminated by the claimant company
- The company must own the freehold or a leasehold of at least 7 years
- The remediation expenditure must not be subsidised by grant funding
- The acquisition cost of the land must not have been discounted to reflect the remediation works and stated as such in the purchase agreement.
Qualifying expenditure includes all costs incurred during the accounting period for remediating the land including the professional fees for identifying the contamination. As with any tax relief there are certain restrictions, for example, in the case of Japanese Knotweed the relief can only be claimed if the Knotweed is treated on site and not taken to a landfill site.
A company must make a claim for Land Remediation Relief within two years of the end of its accounting period and as such it is often overlooked by companies. For completed developments retrospective claims are available on expenditure incurred within two years from the year end within which the expenditure was incurred. For example, if a company has a 31 March year end, any expenditure incurred after 1 April 2012 can qualify for tax relief, so immediate tax savings can still be realised.
Finally there is an additional relief known as Derelict Land Relief which intended to encourage abandoned sites to be brought back into productive use. In order to qualify, however, the site must be listed on the English National Land Use Database as being derelict since 1998 or have been derelict for 10 years. For those sites that do qualify a very generous relief is available on demolishing and preparing the site for redevelopment.
If you think these reliefs may be of benefit to you and your company or just wish to explore this further please contact me at firstname.lastname@example.org or ring me on 01772 821021.
Make sure you come back tomorrow and Tuesday for the final two days of Christmas cheer!