Land Remediation Tax Relief (LRTR)
This relief is a Government incentive to clean up contaminated brownfield development sites and to encourage bringing long term derelict sites back into use. Up to 150% of the costs of qualifying remediation works can be set against profits.
Issue
Historically, the cost and complexity of remediating contaminated sites or clearing obstructions on derelict sites has been a barrier to development. However, current development policy means that ignoring these sites is no longer a viable option. Additionally, in recent years, the introduction of the Landfill Directive has seen remediation costs increase dramatically. Where LRTR has been considered, often the claims have been poorly constructed, undervaluing the relief available.
Relief
LRTR is available to both investors and developers in all commercial markets including residential development. The relief is either a deduction from profits or given as a tax credit if the business is making a loss. The relief applies to buildings as well as land and represents cash savings of up to 35% for investors and 12% for developers on qualifying expenditure.
Approach
We are a team of tax qualified property professionals with senior level experience at the Big 4 Accountancy firms. As a result, we understand the development issues, and all the tax and accounting aspects of remediation and construction projects. We are specialists who can work alongside your own tax and project advisers. Offering a complete service, we can undertake feasibility and entitlement reviews through to claim preparation and securing the best possible claims with HMRC.
Detail
The relief is available to companies which have acquired contaminated land or land which has been continuously derelict since April 1998 in the UK as part of their trade. However, the relief is not offered if the company is responsible for the contamination or dereliction. LRTR is applied to land contaminated with pollutants such as asbestos, pesticides, heavy metals, PCBs, solvents, petrol, diesel, etc. The tax relief may be also be available for costs to deal with the removal of concrete structures, foundations, basements and services. If the tax relief is considered at pre-acquisition stage, the potential claim can be incorporated into the acquisition strategy.
Opportunities
- Preparing former industrial/manufacturing sites for leisure/mixed use.
- Disposing of asbestos located in an existing building – before or during demolition
- Remediating sites containing Japanese Knotweed, Radon and Arsenic.
- Removing concrete foundations and structures form an old derelict site.
Example
An Investor incurring qualifying remediation expenditure of £200,000:
| |
with LRTR | with no LRTR |
| Profits |
£1,000,000 | £1,000,000 |
| LRTR (150%) |
£(300,000) | |
| |
£700,000 |
£1,000,000 |
Tax payable
(at 23% large companies rate) |
£161,000 | £230,000 |
35% cash saving
= £69,000 |