Work highlight / 1 Jul 2021

Cash bonus for developer of brownfield site with land remediation tax credit

Insight shared by:

Gateley Capitus

A small regional developer was undertaking a city centre brownfield development and due to the high cost of dealing with contamination at the site it incurred a financial loss. We were able to claim a large cash payment for the developer from HM Revenue & Customs (HMRC) by preparing a land remediation relief claim.

What is Land Remediation Relief?

Land Remediation Relief (LRR) is a generous tax incentive to encourage companies to remediate contaminated land and buildings. For profitable companies, it reduces taxable profits by 150% of the money spent on qualifying remediation works. Or instead, a loss-making company can give up its future use of tax losses created by claiming LRR in return for a cash payment from HMRC, called a ‘tax credit’, which is worth 24p in the pound of qualifying spend.

How did we help?

The client:

A regional developer

The works:

Over a period of three years, a brownfield city centre site was redeveloped into residential use with commercial units at ground floor.

The problem:

The contaminated former industrial site suffered from dispersed industrial solvents in surface soils and elevated levels of toxic metals across the site, along with asbestos in soils. The remediation strategy required the removal of contaminated materials, and gas protection measures to the new development along with the provision of barrier water pipes. Asbestos was also removed from the existing structure during demolition works.

Value of LRR:

On analysing all of the development expenditure we identified that £250K had been spent on remediation costs that qualified for LRR. If the developer had been profitable, this would have generated a £375k tax deduction. However, due to the development making a loss, the relief was surrendered for a cash payment of just over £60k from HMRC.  This effectively subsidised the cost of the clean-up works by about a quarter.

In conclusion:

Developing brownfield sites can be complex and unknown elements in the ground can upset cost plans. Having an available cash payment certainly helps developers take on these more challenging sites.

What you need to know

LRR is available for both property traders (developers) and investors (owner occupiers and landlords). It is available for residential and commercial sites and may be claimed on all types of projects including new developments, regeneration projects, fit outs and refurbishments.

Retrospective claims can be made but the detailed tax rules are complicated and there is a strict time limit, so don’t delay in seeking expert advice.

Interested in finding out more?

We specialise in all types of LRR and are happy to undertake a no-obligation review of any development or site to give an assessment of the relief available. Visit our Land Remediation Relief page to get in touch with our experts.