Who can claim land remediation relief?
Land remediation relief is a UK corporation tax relief available to companies that incur expenditure on cleaning up contaminated land. The expenditure incurred may involve removing asbestos-contaminated materials, treating Japanese Knotweed and other harmful organisms, treating contaminated soil, or cleaning up oil spills or other natural contaminants from the land.
Land remediation relief is one of the more generous corporation tax reliefs introduced by the UK Government allowing companies to claim up to 150% of the qualifying land remediation expenditure as a tax deduction to reduce their corporation tax liability. Where the company is in a loss-making position, then they can claim a tax credit instead and get a cash return.
Various industries and sectors are likely to benefit from claiming land remediation relief, particularly those involved in activities where land contamination is a common issue. Here are the primary industries and sectors that can benefit the most from claiming land remediation relief.
1. Property Development and Real Estate
- Residential Property Developers: Companies involved in developing residential properties often encounter contaminated land that needs remediation to make it suitable for construction or habitation. These developers often encounter derelict land that needs remediation to make it suitable for construction or habitation.
- Commercial Property Developers: Similar to residential developers, commercial real estate developers, including those developing office buildings, retail spaces, and industrial parks, can benefit from land remediation relief.
2. Construction and Civil Engineering
- Infrastructure Projects: Companies involved in large-scale infrastructure projects such as roads, bridges, and railways often need to remediate land before beginning construction. These projects often require significant capital expenditure, part of which can be claimed under land remediation relief.
- Demolition and Site Preparation: Businesses specialising in demolition and site preparation services frequently deal with contaminated land.
3. Manufacturing and Industrial Operations
- Heavy Industry: Sectors such as steel production, chemical manufacturing, and other heavy industries often have sites with significant contamination issues that require remediation. These sites often pose relevant harm to human health and the environment, necessitating remediation efforts.
- Light Manufacturing: Even light manufacturing sectors may have sites with contamination from previous industrial activities.
4. Energy and Utilities
- Oil and Gas: Companies in the oil and gas sector often need to remediate land affected by spills, leaks, or decommissioned facilities.
- Utilities: Utility companies, particularly those dealing with old infrastructure like gas works, electricity substations, and water treatment plants, may encounter contaminated sites. The costs associated with land remediation can significantly impact the company’s profit and loss account.
5. Retail and Hospitality
- Retail Parks and Shopping Centres: Developers of large retail parks and shopping centres may benefit from land remediation relief when building on previously contaminated industrial sites. There is often a serious possibility that these sites are contaminated, requiring extensive remediation.
- Hotels and Leisure Facilities: Similar to retail developers, companies developing hotels, resorts, and other leisure facilities on brownfield sites can claim land remediation relief.
6. Agriculture and Food Production
- Farming: Agricultural businesses that acquire land previously used for industrial purposes may need to remediate the soil for safe agricultural use, particularly where herbicides and pesticides have been used. The costs associated with soil remediation can be considered qualifying capital expenditure under land remediation relief.
- Food Processing: Companies in the food processing industry may benefit from land remediation relief when dealing with contamination from past industrial activities on their sites.
7. Chemical and Pharmaceutical
- These pharmaceutical companies often handle hazardous substances that can contaminate soil and groundwater. These companies can claim deductions for land remediation costs when computing taxable profits. When they acquire or dispose of land, remediation is usually necessary to mitigate environmental risks.
8. Mining companies
- Both active and abandoned mining sites can have severe environmental contamination from tailings, chemicals used in processing, and other mining activities. The costs associated with land remediation can be deducted from the company’s taxable profits. Remediation is essential to manage environmental hazards and restore land usability.
These industries and sectors can derive significant financial benefits from land remediation relief, reducing the cost burden of necessary land remediation and making a previously contaminated site viable for new development and use.
Of course, to be eligible for land remediation relief, there are a number of conditions that the company must meet. Here are the main ones:
- Land/buildings must be in the UK and must have been acquired for the purpose of the company’s own trading business or rental property business (investment).
- The company must be the freeholder or long leaseholder (i.e. 7 years+).
- Expenditure cannot be subsidised (eg through grant funding, compensation, insurance etc).
- The land/buildings must have been contaminated at the time of acquisition from previous industrial activity.
- Neither the company nor any person connected with the company can be responsible for the contamination.
- The company must incur qualifying expenditure, eg asbestos removal.
- The land must not be a nuclear site.
- The acquisition cost of the land cannot be specifically discounted in order to account for the cost of remediation works.
The company must make a claim for land remediation relief in its corporation tax return for the relevant accounting period. Where the company is a property investor or occupier, it has a two-year deadline from the end of the relevant accounting period to make a land remediation claim. For property developers, they have up to four years to make the relevant land remediation relief claim.
To discuss your specific circumstances and find out whether you can claim land remediation relief, please get in touch with one of our experts.
