Land Remediation Relief Under the Magnifying Glass
Land Remediation Relief (LRR) has long sat in the shadows of the tax system, obscure and unpopular compared with capital allowances and R&D relief. Introduced in 2001 to stimulate brownfield development, claim numbers and values are modest, while the administrative burden to claim the relief is high.
The Government is now consulting on whether LRR is achieving its original purpose and what reforms may be needed to make it more effective, including its potential future role in driving UK housebuilding. Advisers and taxpayers have until 15 September 2025 to respond (gov.uk).
Short History and Overview of LRR
LRR was first introduced in Finance Act 2001, and later amended and consolidated into Part 14 of the Corporation Tax Act 2009, where it remains today. It provides a 150% deduction to companies for qualifying expenditure, with loss making companies able to surrender this for a 16% tax credit (equivalent to 24% of the original spend). Developers claim in the period(s) of disposal, while investors and occupiers must elect to claim the deduction in the year capital expenditure is incurred.
Expenditure qualifies where it prevents, minimises, remedies or mitigates contamination, or removes derelict buildings or structures. Land is contaminated where something in, on or under the land either is causing or could cause relevant harm. Land is derelict if it cannot be put into productive use without removing buildings or other structures and has been in that state since 1 April 1998.
The taxpayer must not have caused the contamination (which must generally stem from industrial activity) or the dereliction of the site (the ‘polluter pays’ principle). Relief is also denied where expenditure has been subsidised or where the polluter retains an interest in the land. The complexity of these entitlement rules, the difference between developer and investor/occupier claims and the anti-avoidance restrictions, makes claiming an administrative burden.
The Consultation
HM Treasury opened the consultation on 21 July 2025, closing on 15 September 2025, asking whether LRR genuinely influences brownfield investment and development decisions, whether rules such as the April 1998 dereliction cut-off, continuous use and ‘polluter pays’ tests are too restrictive, how complex LRR is to claim, whether the relief remains relevant compared with other support, and how errors, complexity and fraud risks, particularly around the payable credit, can be reduced.
This is a thorough consultation, asking broad, open-ended questions to understand whether LRR is achieving its original purpose and if changes could be made to ensure LRR plays a role in the Government’s plans to increase UK housebuilding.
A regime that has flattered to deceive
This is not the first time LRR has faced scrutiny. In 2011, just two years after the 2009 amendment and consolidation, the Office for Tax Simplification concluded that LRR had failed to deliver its policy objective. The then Government considered abolition but retained the relief after industry warned of the impact alongside changes to landfill tax exemptions.
In 2011, around 1,300 companies claimed £40 million of LRR relief. The latest consultation cites 1,750 claims worth £50 million, with a median claim of £1,700 and 90% under £35,000. Over more than a decade, this equates to an increase in claim value well below inflation. With construction costs rising far faster, the real value and impact of the relief has diminished. LRR remains lightly used, dominated by small claims, with limited influence on large-scale brownfield redevelopment.
Opportunity for real reform
The consultation provides a rare opportunity to reshape LRR so it can deliver on its intended purpose. In our view, reforms should focus on simplicity, visibility and relevance.
Convert LRR into an ‘above the line’ RDEC style credit: Replace the 100% plus 50% deduction, with an election needed for capital expenditure, with a single ‘above the line’ credit, like the RDEC regime suggested in the consultation document. This would increase visibility in accounts, ensure loss making companies receive timely cash support and potentially aid decision making by ensuring the incentive appears in project appraisals, rather than as an afterthought.
Align claim timing for all claimants: Allow developers, investors and occupiers alike to claim when expenditure is incurred. This would remove distortions and improve cash flow for developers on high risk brownfield sites. Currently, a developer remediating land might have to wait years to see any tax benefit, long after the remediation works have actually been completed.
Amend the April 1998 dereliction test: Replace the April 1998 test for derelict buildings with a rolling test (for example, 5 to 10 years of dereliction prior to purchase) or align eligibility with local and national planning authority brownfield land registers and datasets.
Reform the ‘polluter pays’ rules: Maintain the principle that polluters cannot benefit, but stop disallowing claims simply because a historic polluter retains an interest, such as on long leasehold transactions with ‘polluter’ freeholders. Relief should follow the party actually incurring the costs, with a targeted anti-avoidance rule to prevent abuse.
Introduce a prescribed list of qualifying contaminants: Publish a statutory list of common qualifying contaminants (e.g. asbestos, hydrocarbons, Japanese knotweed) alongside the existing ‘in, on or under the land’ contamination rules.
LRR has been in place for nearly 25 years but has clearly never achieved the scale of impact intended. Its objectives remain relevant, but its design is flawed and outdated. The consultation is an opportunity to reset the relief, making it simpler, more visible and better targeted to incentivise remediation and brownfield redevelopment.
