LRR – a vital but often overlooked tax relief that could be a game-changer for developers!
One of the challenges for UK developers is that when Japanese knotweed is found onsite it will put the project on immediate hold, and can be a financial concern, but there is one often ignored or overlooked tax relief that can benefit the landowner. And that’s Land Remediation Relief (LRR).
Japanese Knotweed Ltd spoke to an LLR expert about what it is and how it helps land developers to see the benefits of utilising brownfield or contaminated land. Here’s what they had to say:
What is LRR?
LRR was introduced by the government as an incentive to allow companies to repurpose derelict land and buildings and bring them back into use. The government allows businesses to claim back a percentage of the costs associated with that work, and it allows companies to turn brownfield sites, rundown and derelict plots of land into something that can be of use for the local economy.
Everyone wants land and if it can come in good working order, that’s obviously a benefit. The problem is, there’s not so much of that in the UK. We’re not a big country. Local councils and local authorities do have land available for developers, but they may not be in working order at points of sale. By identifying those builds and helping businesses claim back a percentage of the cost, they can turn a rundown plot of land into something that can be worked on.
There are two main benefits to LRR.
The major benefit of LRR is the tax relief in itself. So for developers, construction companies, and owners of land they can receive up to 150% uplift on the expenditure related to the work and a significant proportion of those costs can be claimed back. Developers can essentially build on plots of land that financially might not be affordable because of the work that you have to do. So when they’re scoping and searching the market for potential sites to develop something that may not have been affordable originally now becomes a viable option because the LLR evaluation shows the developer how much money can be returned. So from a perspective of feasibility, it may actually now be affordable and it opens up a wider market that’s not capped or restricted by only searching for land that’s ready to go.
The optimum time to investigate LRR is at scoping phase, so when a developer is deciding whether they want to purchase or they may have already done so and they’re figuring out how to maybe mitigate their tax liabilities. It’s important to determine what level of remediation is needed at this point. If there is a requirement that remediation does need to take place for work to start, then it’s a very simple process to get the LRR ball rolling. There are two main aspects that determine eligibility for a claim for the remediation relief. The first is a survey proving the contaminants or proving there’s some issue that needs fixing, and then the second part is tracking all the expenditure and costs. Once the work has been done and accounts have been filed for that year, a technical report of the relief can be submitted to the government.
There’s two parts to what can be claimed for.
The first is what can be applied for and the second is the associated costs that come alongside it. For example; invasive plant species is a big one, Japanese knotweed costs include the survey, removal, treatment and monitoring. Another one can be industrial contaminants such as hydrocarbons, solvents, heavy metals that may have contaminated the land through previous industrial activities. The associated costs with that can be the removal of the contaminants, any membranes that might need to be put down, any investigative reports that need to be conducted and site surveys and soil samples for analysis. There’s also the natural contaminants such as ground gases which are common especially on industrial sites. The biggest may be asbestos which is difficult to treat and manage. It’s the presence of asbestos, whether it’s in the ground, in the walls or in the ceilings. It must be removed correctly and following compliance to make sure it’s safe for development moving forward. Associated costs can be treatment, removal or boarding the asbestos away. Then there’s the professional fees, the demolition costs of derelict and buried structures as well as any removal costs and administration fees that all come into play. So overall remediation relief can be quite all-encompassing.
Expert’s parting words:
“Don’t discount run down land just because you think there’s a lot of work that’s required. It’s always worth having the review of what you might be able to do with it and have a conversation with a professional, and let’s see from there what the reality of the situation looks like.”
FOR MORE INFORMATION CONTACT AN LRR EXPERT