Contaminated Land Tax Relief

What is Remediation of Contaminated Land Tax Relief (RoCL)?

Land Remediation Relief, otherwise known as Contaminated Land Tax Relief is a relief from corporation tax only. This tax relief provides land and property owners the opportunity to receive a corporation tax deduction of 100%, plus an additional deduction of 50%, for qualifying expenditure incurred by companies in cleaning up land acquired from a third party in a contaminated state.

Land or property may be considered contaminated as a result of industrial activity if:

  • The land is already causing relevant harm.
  • The land has the potential to cause relevant harm to humans, animals or buildings
  • If the land is currently or could potentially be responsible for significant pollution in the groundwaters, streams, rivers and coastal waters.
  • “Relevant harm” includes significant adverse impact on the health of humans or animals or damage to buildings that has a real impact on the way the building is used.

The tax relief is intended to encourage the use of brownfield sites and make the land safer for humans, animals and buildings alike.

The claim must be made within two years of the end of the accounting period when the expenditure was incurred in order to be valid.

Remediation of Contaminated Land Tax Relief Calculator

Contaminated Land Tax Relief (CLTR) can provide tax credits or relief of corporation tax liabilities in many commercial property sectors where companies are subject to corporation tax.

The calculation can be complicated, however as you can see from the calculations below ZLX will maximise your relief by ensuring all legitimate expenditure is taken into account before submitting your claim.

Example 1

Contaminated Land Tax Relief (CLTR) can provide tax credits or relief of corporation tax liabilities in many commercial property sectors where companies are subject to corporation tax.

The calculation can be complicated, however as you can see from the calculations below ZLX will maximise your relief by ensuring all legitimate expenditure is taken into account before submitting your claim.

  • If a company has made taxable profit of £200,000
  • Then at 19% tax rate, there`s a tax liability of £38,000
  • The company then incurs expenditure of £30,000 in remediation costs
  • These are costs expensed so tax relief already obtained worth £5,700
  • A CLTR claim will reduce the profits by a further £15,000 (50% of £30,000)
  • A further £2,850 saved at 19%
  • The tax liability has been reduced to £35,150
  • Total tax saved on costs £8,550 (£5,700 plus £2,850)
  • This equates to £30,000 x 150% x 19%

Example 2

If you are a profitable company, and have capitalised your costs on the Balance Sheet

  • Company has taxable profit, of £200,000
  • At 19% tax there is a tax liability of £38,000
  • Company incurs qualifying CLTR costs of £30,000
  • Since the costs have been capitalised and there has been no capital allowances claimed (so no tax relief so far)
  • A CLTR claim of £30,000 as above will reduce the profits by a further £45,000 (150% of £30,000)
  • This means that £8,550 saved at 19%
  • New tax liability £29,450
  • Total tax saved on costs incurred is £8,550
  • In other words end up in an identical tax position to Example 1

Do I qualify?

If you are a land or property owner that has incurred costs to treat or remove contaminants, then you could be eligible to make a claim.

Examples of relevant qualifying criteria include:

  • Costs for removal of concrete foundations, machinery bases and other structures from long-term derelict land.
  • Costs for treatment or removal of asbestos.
  • Costs for treatment or removal of Japanese Knotweed
  • Costs to reduce or remove lead contamination.
  • Costs for the removal of all petrol and diesel tanks
  • Costs for the treatment of radon or arsenic
  • Costs for the removal of concrete foundations, machinery bases and other structures from long-term derelict land
  • Qualifying expenditure includes the cost of establishing the level of contamination, removing the contamination or containing it so that the possibility of relevant harm is removed. There is, however no relief if the remediation work is not carried out.
  • Land Remediation Relief is available for both capital and revenue expenditure. However, the company must elect, within two years of the end of the accounting period in which the expenditure is incurred, to treat qualifying capital expenditure as a deduction in computing taxable profits.
  • In addition to the deduction for the cost of the land remediation, the company can claim an additional deduction in computing its taxable profits. This additional deduction is 50% of the qualifying expenditure. A company can claim this additional deduction at any time within the general time limit for claims under Corporation Tax Self-Assessment. HMRC does not specify any particular form for the claim. A computation reflecting the claim and submitted in time is sufficient. The 50% additional relief is given in the same period as the actual expenditure is charged to the profit and loss account.
  • A company that makes a loss can surrender that part of the loss that is attributable to Land Remediation Relief in return for a cash payment (a tax credit) from the Government. A claim for a Land Remediation Tax Credit must be made in a CT self-assessment or amended self-assessment.

Don’t worry if you find the laws surrounding Contaminated Land Tax Relief ambiguous or complicated. The experts at ZLX you will guide you through the process and our expert assessments will very quickly provide you with a detailed analysis from our internal software tool which will immediately provide an eligibility conclusion.

Whether your company is making a profit or a loss, a claim could be possible. Contact us on +44 (0)141 739 3377 to speak to one of our experts

How can we help?

ZLX are experts in specialist areas of tax relief.

Our headquarters are in Glasgow, with offices in London, and Manchester, we work with Businesses, Accountants and Solicitors throughout the UK. We have a team of in-house experts which includes Surveyors, Contaminated Land Engineers, Tax Technicians, Accountants, Report Writers and Account Managers.

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