UK: Clean Up Your Act

Last Updated: 16 September 2009
Article by Nick Cartwright

Land remediation tax relief has been significantly amended by Finance Act 2009.

Land remediation tax relief (LRR) is available to companies for certain expenditure on contaminated land in the UK that has been acquired for the purposes of a trade. It takes the form of an enhanced deduction for capital and revenue expenditure, where this relates to the remediation of contaminated land acquired for the purpose of a trade carried on by the company. It is a valuable relief that should not be overlooked.

The Relief

The rate of relief is 150% of the qualifying expenditure. Loss-making companies may, as an alternative to claiming this enhanced deduction, claim a tax credit repayment of 16% of the qualifying loss from HMRC, based on an amount equal to the smaller of:

  • the current trading loss or schedule A loss that cannot otherwise be relieved
  • or 150% of the qualifying expenditure.

The amount of loss carried forward will be reduced by the amount of any loss used in a tax credit claim.

While the relief can only be claimed by companies, a company that is a member of a partnership can claim relief for its share of relevant land remediation costs.


The land must be in a contaminated state when acquired. From 1 April 2009, the interest in the land must be a 'major interest', and in relation to a lease, is a term of at least seven years.

A company buying contaminated land by acquiring another company would not be able to claim relief, if the company purchased (and therefore connected from acquisition) had caused the contamination. In such a situation it may be more effective for the acquiring company to purchase the assets rather than share capital in order to qualify for LRR.

For expenditure incurred on or after 1 April 2009, where the polluter has retained a relevant interest, the person incurring the expenditure will not be able to claim LRR. Relief may also be excluded where the polluter receives an amount of consideration that to any extent reflects the impact, or likely impact, on the land of the value of the remediation tax relief.

Qualifying Costs

Expenditure qualifying for LRR is that which is incurred only because of the need to remediate contaminated land. Preparatory costs qualify where these are for assessing the land and the work is actually carried out.

Only certain costs meet the criteria for land remediation relief:

  • employee costs
  • materials directly used in the remediation
  • remediation costs paid to subcontractors.

No claim can be made for subsidised costs.

Remediation work may be undertaken by the company itself, or on its behalf. This point is likely to be relevant when structuring deals to acquire and remediate contaminated property.

No claim can be made for relief for capital expenditure if that expenditure could have qualified for an allowance under the Capital Allowances Act, whether or not a claim is actually made.

Long-Term Derelict Land

For expenditure incurred on or after 1 April 2009, LRR has been extended to 'long-term derelict land'.

The land must have been derelict from the earlier of 1 April 1998 and the date the major interest in the land was acquired by the claimant.

The types of expenditure eligible for relief in respect of derelict land will include actual and preparatory work for the removal of:

  • post tensioned concrete heavyweight construction
  • building foundations and machinery bases
  • reinforced concrete pilecaps
  • reinforced concrete basements
  • below ground demolition of redundant services.


Land is in a contaminated state if substances in, on, or under land are causing harm or pollution. Since 1 April 2009, expenditure on the removal of Japanese Knotweed formally qualifies (but not where it spread to a site during the ownership period of the claimant, for example by fly-tipping). Outstanding claims for LRR can now be settled on the basis of this new interpretation. In addition, arsenic and radon now qualify as contamination, expenditure on the removal of which can qualify for relief.

As of 1 April 2009, land is not regarded as being contaminated if that contamination was present other than 'as a result of industrial activity'. This includes construction activity, so for example asbestos installed in an office, building or shop as a result of construction will qualify as contamination meeting this condition for access to LRR.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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