The client was unaware, however, that the property is rife with asbestos and thus will have to incur additional costs in removing this asbestos before the property can be used safely. Is there any tax relief for these costs??
A.) If a company incurs expenditure on land in the UK for the purposes of remedying contaminated land, relief is available via land remediation relief. CTA 2009 s1143. The relief works by providing an additional 50% deduction in calculating the profits of the business for the period for the qualifying land remediation expenditure. CTA 2009 s114.
For relief to be available the conditions in CTA 2009 s1144 must be satisfied. The expenditure must be incurred on either staffing costs, materials or expenditure on land remediation that is contracted out (additional conditions apply for connected sub-contracted land remediation, see CTA 2009 s1175).
There is additional legislation that regulates the way asbestos is removed so that it is dealt with safely. As a result of this legislation, further costs may be incurred in containing the asbestos and dust during removal. HMRC state that these costs incurred to comply with the regulations are part of the cost of removing asbestos and so may qualify for land remediation relief. See CIRD63200.
It is unclear what specific costs your client has incurred but it is also possible for the company to obtain relief for capital expenditure. If the company makes an election under CTA 2009 s1147 the company can deduct the capital expenditure from the profits of the trade. This then allows the expenditure to qualify for the additional 50% deduction. It is not possible to make an election in respect of any expenditure that qualifies for plant and machinery allowances.
As your client is loss-making, the additional 50% deduction will only enhance the trading loss. However, it is possible to surrender the loss for a tax credit. CTA 2009 s1151. The tax credit is equal to 16% of the qualifying land remediation loss and will be set off against the company’s corporation tax liability or repaid to the company. Trading losses carried forward are then reduced by the amount of the surrendered loss. CTA 2009 s1158.
For further commentary, see the Croner-i Direct Reporter at 715-600.
