An additional headache where historic building stock is being upgraded to meet the new MEES requirements is addressing contaminants on site, such as asbestos. Land Remediation Relief (LRR) provides a welcome incentive for developers and investors to offset that cost, by obtaining 150% tax relief and here we look at its application and how to claim.
Whilst this form of tax relief has been around for many years, the level of claims made against it is relatively low compared to other forms of tax relief for property related expenditure. This can be put down in part to the fact that it is an elected form of tax relief, which is not present on most standard tax return forms and so unless your accountant recognises what expenditure to look out for, which when lumped in with other contractor’s costs, invariably it gets overlooked and the tax relief is missed altogether.
The legislation states that a substance which can “cause relevant harm” may qualify for this tax relief. Typically asbestos is known to qualify but often the extent of the legislation is not appreciated, with Japanese Knotweed, long term derelict land (including foundations), arsenic, radon and underground gases examples of what may attract tax relief.
As long as you are not the entity or connected to the entity responsible for the original contaminant and a UK Corporate (not an individual or partnership), then a claim for LRR may be made. Unlike capital allowances, a developer can also claim as well as an investor, which is particularly relevant to housing developers looking to develop contaminated sites.
It is worth highlighting however that investors must make an election to claim LRR within 2 years of the tax year end in which the expenditure is incurred, which allows a degree of retrospective reviews to take place. The relief must be utilised in the year of expenditure; if loss making in that year a tax credit is available instead.
If you would like Veritas Advisory to provide an indicative free initial assessment of your expenditure, then please contact one of our Directors (https://www.veritasadvisory.co.uk/about-us/).