Don’t forget tax relief when buying brownfield land

Don’t forget tax relief when buying brownfield land

Date: February 6, 2023Businesses wanting to expand their physical footprint often find the price of derelict brownfield land makes it an attractive choice, but worries about contamination lying beneath the surface can prevent them from finalising a deal.

All too often this is a wasted opportunity because companies fail to factor in the tax relief they could have got for bringing the site back into use.

Land Remediation Relief also known as Contaminated Land Tax Relief — is designed to help companies do this, reducing the number of derelict brownfield sites that sit idle far longer than they should.

It is the government’s antidote to the considerable cost of removing different types of contamination, ranging from asbestos and heavy metals to Japanese Knotweed, oils, tars and more.

Yet it is a vastly underclaimed relief. HMRC data shows 1,600 claims were made in 2017-18 for £35 million in relief, and it has barely risen in subsequent years. In 2021-22, relief also totalled £35 million, though the number of claims made has not yet been published1.

Initial surveys

Finding out what contaminants lurk beneath the surface of a site can be an expensive business. It’s enough to put a lot of potential purchasers off.

But the good news is that you can claim tax relief on all the costs associated with bringing a piece of derelict brownfield land up to scratch, including the initial surveys, which can be expensive.

Removal of contaminants

The relief also applies to the subsequent remediation work and removal of contaminants.

What is Land Remediation Relief?

Land Remediation Relief allows companies to claim relief of 100% of the cost of this work against their corporation tax bill. An additional 50% can be claimed for qualifying costs associated with cleaning up land acquired from a third party that is in a contaminated state and causing, or has the potential to cause, harm to people and animals, or water pollution.

Qualifying activities under this additional relief include:

  1. the removal or treatment of Japanese Knotweed
  2. removal of asbestos
  3. treatment of gases and chemicals within the land
  4. removal of underground contaminated tanks
  5. and removal of concrete foundations, pillars and bases.

What if you have already carried out work?

If you or a client have already carried out work that you think might have qualified, you may still be able to benefit as claims for Land Remediation Relief can be backdated two years.

Land Remediation Relief can make a huge difference to a company’s ability to get the right premises at the right price.