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Claim 150% Tax Relief For Fixing Contaminated Land

May 16, 2016

Advice on tax relief for contaminated land from Optimise Accountants

Imagine this scenario – you’ve just had a surveyor’s report back and it suggests the warehouse you’re interested in turning into flats is filled with asbestos, or the overgrown garden is hiding a rampant growth of Japanese knotweed.

Problem or opportunity?

It’s well-known this type of discovery would likely scare off many lenders, and hence buyers reliant on borrowing, thus presenting an opportunity for self-financing investors to secure a discount. But what’s less commonly known is that you could actually profit from this scenario, thanks to a little-known tax relief called Land Remediation Relief.

If you buy a property in a contaminated state using a company structure – the relief is not available to individuals or partnerships – then you could claim tax relief of 150% of the cost of remedying that contamination. Therefore, if you spend £10,000 on decontaminating the land, you could claim £15,000 in tax relief in the same year as the expense was incurred. If the work pushes your company into a loss, you can also claim a tax credit from HMRC.

What is contamination?

The scheme was originally introduced in 2001 to bring land previously blighted by industrial use back into use. To qualify as contamination, there must be a threat that a substance present could cause harm to humans, animals or the surrounding environment. Asbestos is a good example of a contaminant that is commonly found in old buildings. Qualifying expenditure includes the cost of ascertaining the level of contamination, and removing or containing the contamination. You cannot, however, claim relief for any investigations of contamination if no remediation work is carried out.

Prior to 2009, naturally occurring contaminants were outside the scope of Land Remediation Relief. Since then, however, it has also been possible to claim relief for Japanese knotweed, radon and arsenic. Although with most contaminants you can only claim relief if you purchase a property that is contaminated — no relief is available for a property that has become contaminated during your ownership — HMRC makes an exception for Japanese knotweed. If a property has become affected by Japanese knotweed due to actions outside your control —for example, fly-tipping —and you have acted in a timely manner to prevent its spread, relief is available.

Given that Japanese knotweed has been described by the Environment Agency as “indisputably the UK’s most aggressive, destructive and invasive plant” and causes £150m in damage in the UK every year, it’s helpful to know that if your site is taken over by this rapidly spreading weed then you’ll be able to claim extra tax relief for the cost of removing it.

If you’re reading this and wishing you’d know about it before as you paid to have harmful material removed from a past development, there are options to claim retrospectively for up to two years.

Next steps 

If you want to understand how to implement this strategy or to discuss other finance/tax questions then please book some time with us using the below calendar
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If you are looking for a new accountant then please book some time with us using the below calendar. Please note that this booking is to describe our services and will not be used to discuss your personal tax affairs.



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Telephone: 0115 939 4606
Email: simon@optimiseaccountants.co.uk