How much land remediation relief are you eligible to claim?

Land remediation relief is UK tax relief that benefits companies that clean up land or property that they bought from someone else. In this insight we provide guidance on the potential value of land remediation relief, how to claim it and who is eligible to claim.

Who is eligible to make a land remediation relief claim?

Land remediation relief (LRR), also sometimes called ‘contaminated land relief’, benefits companies that clean up land or property that they bought from someone else. It is available to developers, housebuilders, investors and owner-occupiers.

When can a LRR claim be made?

When the benefit can be claimed and whether a backdated claim can be made, depends on whether a company’s spend is ‘capital’ (investment) or ‘revenue’ (trading).

For ‘capital’ spend by landlords and occupiers, the relief is claimed in the year the money is spent and claims must be made within two years of the end of that accounting year.

Whereas relief for ‘revenue’ spend by developers and housebuilders is claimed when the land or property is sold. Claims may be made up to four years from the end of that accounting year.

LRR for revenue expenditure

Developers and housebuilders can write-off their development cost for tax as a normal business outgoing. But claiming LRR lowers their taxable profits by a further half of the qualifying remediation cost. The extra tax saving is 12.5p for every pound of qualifying spend.

LRR for capital expenditure

A property investor or owner-occupier normally cannot get a tax deduction for ‘capital’ clean-up costs. But claiming LRR means they can elect to treat qualifying spend as a revenue expense for tax purposes. This means they can deduct the cost from their taxable profits. This gives an extra 150% relief so makes the relief three times more valuable than it is for property traders. The tax saving is 37.5p for each pound of qualifying spend.

How do you calculate LRR allowance?

To qualify for tax relief, the money must be spent on cleaning-up the land or property. The overriding question that needs to be asked is whether the company would have spent the money if the land or property had not been contaminated?

How does LRR affect tax?

Once the qualifying clean-up spend is identified, this amount is multiplied by 1.5 to calculate the increased amount that can be written-off for tax. Claims for the scheme are made in a company’s usual corporation tax return.