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Topic: Elections and claims

Election for land remediation relief
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Election for land remediation relief

Election for land remediation relief

Land remediation relief gives an enhanced deduction for qualifying revenue expenditure spent on bringing land back into use in some circumstances. Use our template letter to treat capital costs as qualifying.

Relief

Land remediation relief (LRR) is an enhanced deduction of 150% on expenditure related to bringing contaminated land back into productive use. This can reduce tax, or for loss making companies give rise to a payable credit. Since 2009 this has included derelict land, i.e. land which cannot be used without the removal of derelict buildings and other structures. Expenditure on doing this would normally be capital in nature. However, you can elect that such expenditure is included in LRR so you get the relief upfront not when you eventually sell the land.

Land is classed as derelict when it is:

  • out of productive use
  • incapable of being brought back to productive use unless buildings and structures are removed from it.

Tip. Because you are effectively treating the expenditure as revenue, you cannot deduct it again when you later calculate any capital profit or loss on the disposal.

Example

Acom Ltd needs more storage for its machine hire business. It finds a suitable plot on which to build a warehouse, which hasn’t been used for nearly 20 years and includes derelict building foundations. It spends £20,000 on clearing the site but can claim a corporation tax deduction of £30,000.

Claiming

To benefit you have to make a formal election for the capital expenditure to qualify for LRR. Use our Election for Land Remediation Relief to do this. Ensure that you attach a schedule of costs with a description of what each cost relates to.

Time limit

The election has to be made within two years of the end of accounting year that the expenditure was incurred.

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