Land Remediation Tax Relief
What is Land Remediation?
Land remediation refers to the process of identifying, evaluating and mitigating the contamination of soil, water or air caused by human activities or natural processes. These contaminants can arise from various sources including industrial activities, improper waste disposal, chemical spills and historical land use practices.
The objective of land remediation is to restore polluted sites to an environmentally safe and beneficial condition, ensuring they can be reused or repurposed without posing a risk to human health or the environment. The process involves a comprehensive assessment of the site, careful planning and the implementation of remedial actions to achieve a successful cleanup
What is Land Remediation Tax Relief?
It is 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. It applies specifically to corporation tax that gives tax reductions of up to 1.5 times the money spent on cleaning up the contaminated site and building.
There is a difference in contaminated and derelict land which also affects what is considered a qualifying expenditure.
Contaminated land is defined as land with something on, or under it, which causes relevant harm or there is a possibility of it causing relevant harm (e.g. Japanese knotweed). The relief is available for people who do manage to come up with a solution to decontaminate land or buildings.
Derelict land is defined as land out of productive use and is only able to be brought back into productive use if buildings or structures on it are removed.
What is considered when calculating valid expenditure on contaminated land:
Costs incurred to change the condition of the plan.
Costs incurred to establish the level of contamination including the removal of contaminated soil and water, treatment of harmful organisms, the removal of natural contaminants and the removal and treatment of invasive plants.
What is considered when calculating valid expenditure on derelict land:
Costs incurred for the removal of post-tensioned concrete heavyweight construction, building foundations and machinery bases, reinforced concrete pile caps, reinforced concrete basements or below-ground redundant services.
Qualifying Expenditure
Employee Costs
Costs for those directly and actively engaged in the relevant land remediation – does not include admin fees. If an employee only spends part of their time on the project that time is calculated as:
- Ø 20% or less time – Nil deductions
- Ø Between 20% and 80% – the appropriate proportion
- Ø 80% or more – 100% deduction
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
Qualifying land remediation expenditure encompasses both revenue expenditure and capital expenditure, as long as the company has chosen to deduct it when calculating profits.
Who can claim Land Remediation Tax Relief?
The following conditions must be satisfied to claim Land Remediation Tax Relief:
- The claimant company must have a freehold or lease of at least seven years.
- The business must be subject to UK corporation tax, individuals and partnerships are not eligible, except for companies within a partnership that can claim relief for their share of land remediation expenditure if requirements are met.
- 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 needs to spend money on fixing or cleaning up the land. This spending is considered capital expenditure, and it should be for approved remediation activities. It should be noted that only costs that would not have been incurred if the land had not been contaminated, qualify.
- Expenditure must not be grant-funded or allowable under any other capital allowances.
How Growth Hive UK can help
It is not always easy to ensure the required conditions are met or distinguish between qualifying and non-qualifying expenditures, so our team can guide you through the process seamlessly from start to finish and help gather and review all necessary information and documentation to maximise eligible claims.