Land Remediation
Tax Relief - LRR
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Land remediation relief (LRR) can improve a company’s cash-flow by reducing its tax liability and, in some cases, by getting hold of a tax repayment (Land remediation credit). This relief is available on qualifying expenditure made on building or land in the UK that have been acquired by a company and, at the time of acquisition, this land was in a contaminated or abandoned state.
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Land remediation tax relief
Land remediation tax relief can be claimed on the cost of employing staff who are occupied in carrying out the remediation, the cost of material being used, and on payments given to subcontractors that are supporting with the remediation (including certain professional fees).
The relief is available for costs that are either capitalised or expensed in the P&L. A business can claim relief in either of two ways. It can set 150% of its qualifying expenditure against taxable profits; i.e. can reduce the amount of profit on which tax is payable by an additional 150% of spend for revenue costs, and an extra 150% of spend in case the cost was capitalised. Or if a business has a loss, it can take advantage of the credits by claiming a 24p per £1 cash refund on the qualifying expenditure. Let’s assume: a company spent £30,000 on qualifying land remediation. In addition to the standard tax relief, it can claim relief on an additional £15,000 (£30,000 x 50%). At a presumptuous tax rate of 20%, this results in a £3,000 tax saving.
The requirements for claiming the land remediation tax relief are as follows:
- The land must be situated in the UK and should be acquired by the company for the purposes of a UK property business or to carry out trade
- At the time of acquisition, all or some part of the land was in a contaminated state. Land is in a contaminated state if it’s condition is because of substances in, or around the land, which are harming or can harm or there is a possibility of harm being caused
- The company incurs qualifying land remediation expenditure with respect to the land. Qualifying expenditure means expenditure made on land or some part of the land which is in a contaminated state and which would not have been incurred if the land had not been in a contaminated state
The land remediation tax relief is only available to companies, and not to partnerships or individuals. However, a company, that is a member of a partnership, can claim relief with respect to its share of the partnerships qualifying land remediation expenditure
- Identify remediation solutions best suited to a specific site
- Prepare and collate documentation required by HMRC to support the claim
- Identify remediation-related costs eligible for Land Remediation Tax Relief
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