Land remediation relief

LRR – what is it ?

An extra tax relief for money spent on certain works from May 2001 onwards.

Whom can claim LRR ?

Companies only.

What is LRR worth and are there financial limits ?

The company receives a 50% uplift or rebate for every pound of qualifying expenditure, e.g., a company paying corporation tax at the rate of 30% will enjoy a tax saving of 15p for each £1 of qualifying expenditure, and a company paying corporation tax at 19% will enjoy a saving of 9½ p for each £1. Companies with trading losses and not, therefore, paying corporation tax, can claim a rebate from HM Revenue & Customs.

There is no absolute limit on the amount of expenditure for which relief can be claimed. For refunds or rebates which may be due for past years, interest accrues in favour of the company meaning that the cash value of the claim will be enhanced.

Money spent on what ?

Any costs which relate to the treatment, containment, remediation, mitigation or removal of harmful substances on land and/or buildings in the UK. The land etc., must, by some means, be under the ownership of the company (e.g., freehold, lease, licence).

The costs can relate to fixed assets (e.g., a company's premises) or trading stock. Expenditure which qualifies for capital allowances (whether claimed, or not) is excluded; this is most typically relevant where claims to Industrial Buildings Allowances are in point, but IBAs are due to be abolished from 2011.

The harmful substances must have been present when the land was acquired. Any harm caused to the land etc., whilst the land was owned by the company (or another group company) is excluded.

Harmful substances for this purpose are not the same as contamination etc., under the Environmental Protection Act and other similar laws. The tax rules are less stringent that those under environmental regulations. In particular, there is no requirement that the land or buildings are made entirely free of harm; just made better than they were.

Harmful substances

The substances can be natural or artificial, and in solid, liquid, gas or vapour form. Plants, animals or insects are excluded.

Harmful means a risk of damage to the health of living things (humans or animals), interference with ecological systems, damage to property. Included in harm is anything which may be said to be unsightly or which gives off an unpleasant smell.

Whether something is harmful is a matter of fact, determined on a commonsense basis. There is no need for the harm to be certified by any particular agency.

What costs ?

Qualifying costs include:

• Materials used for treatment, minimisation etc of harmful substances.


• Fencing, demolition, plant hire, land removal costs etc.


• Subcontractor costs related to any of the above (subject to some restrictions where paid to a group company).


• Company wages for employees engaged on qualifying work (subject to apportionment and de minimis rules).


• Investigatory and preliminary professional costs, e.g., surveyors, investigators, but only where work is subsequently undertaken on the site.

Records

There is no prescribed form of records required for substantiating a claim for LRR. The appropriate records are those items considered suitable for evidencing the state of the land/buildings when acquired, the monies spent, and the nature of the harm removed or mitigated etc.

Time limit for claims

Six years from the end of the relevant accounting period.

Relevant law & guidance

Finance Act 2001, section 70, Schs 22, 23. HMRC manuals at CIRD60001.