Land Remediation Tax Relief Boost your Tax Savings & Unlocking Toxic Land

ALUN OLIVER FRICS, Managing Director of E³ Consulting, highlights the valuable benefits of Land Remediation Tax Relief (LRTR) - designed to encourage brownfield site regeneration and save you money – so why are relatively few firms making claims?

Almost exactly 20 years ago, the UK government introduced land remediation tax relief (LRTR) as part of the Finance Act 2001 with the aim of making brownfield site regeneration more affordable. Two decades on, is the relief still supporting rejuvenation of our towns, cities and former industrial sites?

Under the auspices of HMRC's Tax Law Rewrite Project, LRTR was tightened up and extended to include remediation of long-term derelict land as of April 2009, becoming part 14 of the Corporation Tax Act 2009.

The Office of Tax Simplification (OTS) went on to recommend the abolition of the relief in 2011 as it felt the relief was not working as intended, citing LRTR as 'not considered to influence behaviour' and 'not a cost-effective method of achieving the policy rationale' which was to encourage land remediation of brownfield sites through tax relief for developers Most taxpayers felt they were not assured of getting it but some pushed the boundaries too far in their claims. The OTS cited 2007/08 figures showing that the average claim was some £33,600, and that total annual LRTR claims were £40m.

The government chose not to take up the recommendation, though, and LRTR remains available today. The latest figures available, shown in Table 1, do not show much more take-up, with some 1,600 claimants and £35m total relief, yielding an average claim of around £22,000. This is not surprising as the rules are now more stringent. At the same time, the estimated cost of LRTR to the Exchequer in 2019/20 was £40m.

As property taxation specialists, we at E3 Consulting see a wide range of projects, and believe that most claims are less than £15,000, but there are a small minority in the region of hundreds of thousands, or even millions, of pounds. Furthermore, a recent change in the tax status for non-resident landlords may see claims increase, as since April 2020 they have become eligible to apply for LRTR.

LRTR offers a significant boost to regeneration, but many more claims should be possible, while many developers are not collecting data effectively on their projects. For some, this is because the data collection costs and tax benefits are not aligned; the project teams are reluctant to collect data as they would have to bear the costs, while the tax benefit sits at head office level. Furthermore, they or their advisers either consider it uneconomic to claim, or have little or no awareness – let alone experience – of presenting and negotiating claims with HMRC. Consequently, firms may be paying too much tax.

THE FULL ARTICLE AS PUBLISHED IN THE RICS LAND JOURNAL ON 29 JULY 2021 IS AVAILABLE AS A DOWNLOAD ON THE RIGHT SIDE OF THE PAGE.