Across the UK, hundreds of property developments are currently underway on previously developed, contaminated and derelict land that could potentially qualify for Land Remediation Relief, a unique tax relief that remunerates developers with tax credits, or reduces the development company’s Corporation Tax bill.
With more and more developers regenerating contaminated land, property investors and owner-occupiers alike could claim up to 150% Corporation Tax relief on qualifying remediation expenditure. Developers can receive Corporation Tas relief at 50%, while even loss-making businesses can receive a 24% credit.
Qualifying expenditure for Land Remediation Relief includes costs incurred in preventing, remedying, minimising, or mitigating pollution or harm of land or controlled waters, or restoring land or controlled waters to their former state. Examples of qualifying expenditure include eradicating harmful contaminants or organisms such as radon gas or arsenic; recovering buried structures; and removing asbestos from buildings.
Under the relevant legislation, land is deemed contaminated where there is something on, in, or under it that causes ‘relevant harm’, or could potentially cause ‘relevant harm’ in the future. The relief currently applies only to businesses, and cannot be claimed by a company if it has already claimed capital allowances on the same expenditure. If a company was the original polluter, or is in some way connected with the original polluter, it will not qualify for Land Remediation Relief either.
Where a business does qualify for Land Remediation Relief, the company typically claims it via its annual Corporate Tax return.
Land Remediation Relief is a generous relief, but one that is fairly underutilised at the moment. However, with many developers focusing on regenerating derelict and contaminated land, it is important for investors and developers to consider whether they may be eligible to make a claim under the scheme.
As director of Xaviar Investments Limited, Zuneth Sattar has extensive experience of the property development industry. Land Regeneration Relief is just one of many measures implemented by the UK Government to incentivise developers to regenerate brownfield land as part of its commitment to increasing the number of affordable homes to meet significant shortfalls across the country.
Land Remediation Relief is a channel through which the UK Government supports a return to productive use of contaminated or derelict land. For decades, the UK has experienced a substantial shift in patterns of employment and industry, leading to a considerable amount of previously developed land falling out of use. Analysts estimate that in England alone, 345,000 new homes are needed each year just to keep up with demand.
In 2015, the UK Government launched an initiative to deliver one million new homes by 2020. Land Regeneration Relief is seen as a step in the right direction, incentivising developers to invest in the regeneration of derelict and contaminated land.