QUESTION: Our family company is growing and has recently purchased nearby premises to expand its production facility. Unfortunately, when we went to start the renovations, it became clear the property was full of asbestos that must be removed before we can continue. Our contractor advised that there is a tax relief on these costs. Can you advise how we can claim?
ANSWER: You aren’t the first to find yourself in this position and to avoid buildings becoming derelict by those unwilling to undertake the cost of removing, the government introduced Land Remediation Relief to ease the burden. This is a relief that gives companies a tax deduction up to one and a half times the money spent on cleaning sites and buildings.
Asbestos removal is highly regulated so that the asbestos removed is dealt with safely, meaning that further costs may be incurred in containing the asbestos and dust during removal. HMRC have confirmed that these costs incurred to comply with the regulations are part of the cost of removing asbestos and qualify for land remediation relief.
The relief is not available to individuals or partnerships. However, a company that is a member of a partnership can make an election in respect of its share of the partnership’s land remediation expenditure provided it satisfies the relevant conditions.
While this generous relief is only available to companies, there are other conditions that must be satisfied to qualify for the relief, including having an interest in the contaminated UK property for the purpose of your business. However, the company itself or people connected to the company cannot be responsible for the contamination.
The expenditure must be incurred on either staffing costs, materials or expenditure on land remediation that is contracted out.
The Land Remediation Relief tax relief is claimed on your company’s corporation tax return in the period the costs were incurred to reduce your taxable profits. If the company is loss-making in the year costs were incurred, the additional 50% deduction will enhance the trading loss.
However, it is possible to surrender the loss for a tax credit equal to 16% of the qualifying land remediation loss. The tax credit will be set off against the company’s outstanding corporation tax liabilities or repaid to the company.
Trading losses carried forward are then reduced by the amount of the surrendered loss. You will need to weigh up whether it is worth surrendering these losses @ 16% to ease current cashflows or carry forward the losses for future tax relief of up to 25%.
Discuss a possible Land Remediation Relief claim with your accountant to make sure you are maximising the claim and do not miss the deadline.
- KellyAnne Murtagh (kellyanne.murtagh@aabgroup.com) is senior tax manager at AAB Group Accountants Ltd (www.aabgroup.com). The advice in this column is specific to the facts surrounding the question posed. Neither the Irish News nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.
