Land Remediation Relief (LLR) is available if you own or manage a building that needs work to contain asbestos safely or remove it. In broad terms, for qualifying expenditure, an additional 50% deduction is given for certain costs incurred by companies on cleaning up contaminated land or remedying land in a derelict state. It is important to note that (for the purposes of this relief) the term ‘land’ includes buildings on that land.
Basic conditions
The basic conditions that the expenditure must meet are set out at S1144 Corporation Tax 2009. These basic conditions are as follows:
Condition A is that it is expenditure on land, all or part of which is in a contaminated state or a derelict state.
Condition B is that the expenditure would not have been incurred if the land had not been in a contaminated or derelict state.
Condition C is that, in the case of land in a contaminated state, expenditure on relevant contaminated land remediation is undertaken by the company.
Condition D is that the expenditure is –
- Incurred on staffing costs,
- Incurred on materials,
- Incurred in respect of relevant land remediation contracted out by the company to another person with whom the company is not connected, or
- Qualifying expenditure on connected sub-contracted land remediation.
Condition E is that the expenditure is not subsidised.
Condition F is that the expenditure is nor incurred on landfill tax.
Additional requirements
There are then subsequent additional requirements and exclusions, with the main points being:
- If the company or someone connected with the company is the original polluter, then no additional tax relief can be claimed. For example, if a company many years ago buried contaminated waste under a factory, it cannot later claim land remediation relief to rectify this. This is the case even if a company originally built a building with an asbestos roof, purely because the use of asbestos was at that time industry standard.
- A landlord cannot claim land remediation relief in respect of contamination caused by a tenant of theirs. The company effectively must have purchased the building with the asbestos roof to claim the additional relief.
Other points
To claim this relief, it is made on the standard Corporation Tax Return for the company covering the accounting period in which the expenditure falls.
Although primary legislation says that the removal of natural contaminants, past governments have extended the scope of the relief to three specific naturally occurring contaminants, which are radon, arsenical compounds and Japanese knotweed.
The enhanced tax relief is available regardless of whether the expenditure is included in the profit or loss account or if it is capitalised and included as a fixed asset on the balance sheet. Either way, the tax relief is of the same value. For capital expenditure, the company must elect, within two years of the end of the accounting period in which the expenditure is incurred, to treat it as a deduction in computing taxable profits.
A company that makes a loss can surrender the part of the loss that is attributable to LLR in return for a cash credit. This claim must be made on the Corporation Tax Return. The land remediation tax credit to which a company is entitled is an amount equal to 16% of the qualifying land remediation loss surrendered. It is analogous to the old “SME” relief for R&D relief losses.
If you would more information on land remediation relief please contact Churchgates for a free initial meeting on 01284 701271 or email us at [email protected].
