Land Remediation Relief to be reduced, not abolished

Among recent Treasury consultations on the removal of tax relief for ‘black beer’ and Angostura Bitters nestles a proposal for the removal of enhanced tax relief for developers of brownfield sites.

Land remediation relief was introduced in 2001 to act as a catalyst for brownfield redevelopment by offering 150% tax relief on site investigation and remediation expenditure. The relief represents a benefit to brownfield developers of £40m per year with around 1300 companies a year claiming the relief. 

The brownfield community has been dismayed by new reports that the tax relief is to be abolished on 1st April 2012, and dispute the Government’s assertion that it was “a tax bonus for work that would have been done anyway”. In order to clarify the situation, HM Treasury advised GroundSure that:

“the changes only affect the enhanced relief available under Land Remediation Relief, and do not affect any relief available under the general rules for computing the profits for tax purposes.

The changes mean that:

• Companies will no longer be able to elect to claim a deduction for capital expenditure.
• Companies will no longer be able to claim the 50% uplift on qualifying expenditure.
  

However, companies will still be able to deduct any revenue expenditure in arriving at their taxable profits.

The timing of the deduction follows the treatment under Generally Accepted Accounting Principles, which means that relief will normally be given when the site being re-developed is sold.”

In other words, after the 1st April 2012, 100% of the costs of any remediation work will qualify for tax relief against profits when the development is sold, as opposed to the 150% that can currently be claimed. Whilst this may be detrimental to some developer’s profits, it does not appear to represent the hammer blow to regeneration that many in the sector feared.

 

 

 

 

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