Any tax relief given by HM Revenue & Customs should be jumped on at the first opportunity – you just don’t know how long they will be around. Contaminated Land Remediation Relief was introduced in 2009 to provide an incentive to UK property development companies to develop derelict or contaminated land. Given the tough economic times at the moment, especially for the property sector, it is surprising how often this relief is overlooked!
Here are the answers to 4 frequently asked questions:
1. How much relief can you claim?
A company can claim an extra 50% of the costs of cleaning up the contaminated land against their taxable profits.
2. What is Contaminated Land?
Land is in a contaminated state if it has something in, or under it that is causing harm or is likely to cause harm and arose as a result of industrial activity. Some common examples are land contaminated with asbestos, arsenic, radon and, although it doesn’t strictly fall within the definition, there is specific guidance to deal with claims to remove Japanese Knotweed!
3. What costs qualify?
The principle is additional costs incurred as a result of the contamination. For example, materials, subcontractors and even internal staff time costs.
4. When can the relief be claimed?
The relief is available when the costs are charged to the company’s profit and loss account. In the most common example, in property development companies where costs are carried forward as work in progress on the balance sheet, the relief is claimed when the developed properties are sold.
The advice is simple! Any costs you believe are related to land remediation should be grouped together as they are spent to be reviewed when the tax computations are prepared. Remember – it is much easier to ensure all costs are collected if this is done throughout the year rather than looking back in hindsight when the year-end has long passed.