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Under Sections 1169 of the Corporation Tax Act 2009 (CTA 09) and associated legislation, HMRC enforces robust anti-avoidance provisions to prevent companies from artificially inflating or manufacturing claims for Land Remediation Relief (LRR), Land Remediation Tax Credits (LRTC), and related capital expenditure deductions.
Scope of the Legislation
The law specifically addresses scenarios where a company enters into arrangements wholly or mainly for the purpose of creating or increasing a tax relief claim beyond what would otherwise be legitimately available. If such arrangements are identified, the amount of relief or credit is restricted to the figure the company would have been entitled to in the absence of those arrangements.
This applies to:
- Land Remediation Relief claims that the company would not otherwise qualify for, or claims that exceed the legitimate amount
- Deductions for capital expenditure that would otherwise be disallowed or reduced
- Land Remediation Tax Credits claimed in excess or without entitlement
Definition of “Arrangement”
The term “arrangement” is defined broadly, encompassing any scheme, agreement, or understanding—whether legally enforceable or not. This wide interpretation allows HMRC to capture a broad range of artificial transactions designed to exploit reliefs.
Practical Implications
Taxpayers and advisers should exercise caution when structuring transactions involving land remediation or related capital expenditures. Artificially constructed schemes aimed at enhancing relief claims are subject to adjustment, with potential penalties for non-compliance.
HMRC Procedures
HMRC officers who suspect such avoidance arrangements are instructed to report the matter to the Business Anti-Avoidance Intelligence (BAI) unit within the Business Profits division for further investigation and guidance.
Analysis
These anti-avoidance rules reinforce HMRC’s commitment to tackling tax avoidance by closing loopholes around environmental tax incentives. While Land Remediation Relief and Tax Credits provide valuable support for businesses investing in reclaiming contaminated land, the legislation ensures that only genuine claims are rewarded, maintaining the integrity of the tax system.
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