Last week, the UK government opened a consultation on reforming Land Remediation Relief (LRR). LRR is a Corporation Tax relief that companies can claim when they bring contaminated or derelict land back into use. It is part of the wider push to develop brownfield land and help meet the government's housebuilding targets.

The current relief gives an extra 50% deduction on qualifying revenue spend, on top of the 100% deduction normally available for that expenditure This means a total relief of 150% on qualifying spend. A loss-making company can surrender the loss for an upfront cash tax credit at 16%. Read our article here for more information about LLR.

The consultation sets out three proposals for change:

• Aligning the contamination test with the planning system

• Removing the 1998 date for derelict land and replacing it with a new definition

• Letting developers claim the relief earlier

Proposal 1: Aligning with planning

The current definition of contamination under LRR is different to the definitions used by local authorities when they set remediation conditions through planning. This can cause confusion over what claimants believe will qualify for the relief.

The proposal is to align the remediation conditions set by local authorities with the tax relief definitions. Once the authority discharges the condition with a discharge notice, an LRR claim would include that notice as evidence and take the costings directly from it. The idea is that this would simplify the claim process and increase the amounts claimable. Where a project does not need planning permission, a streamlined list of eligible contaminants would remain.

The areas still being worked through include, how to manage the process across the devolved governments, which have different planning systems, and the potential delay between finishing the work and the authority formally discharging the condition.

Proposal 2: Derelict land and the 1998 date

The current relief for derelict land requires the land to have been derelict since 1 April 1998. As time passes, less land qualifies for relief.

The government is exploring replacing the 1998 date with a new statutory definition of derelict land or alternatively moving the 1998 date to a more recent year.

Proposal 3: Claiming the relief earlier

At the moment, if you build to sell, the remediation costs sit in stock, and you only get relief when the units are sold. This creates a lag between the spend and the relief. This does not apply to assets built to hold.

The proposed change would let developers elect to deduct qualifying revenue spend in the year it is incurred, rather than waiting for the sale. Bringing the deduction forward creates a timing difference, so an electing company would recognise a deferred tax liability.

What this could mean

The reforms would lead to a relief that could be easier to access and give earlier and higher reliefs. However, the reliance on planning authorities to trigger contamination claims could get in the way of some benefits.

The proposals are not law and would only be taken forward if the reforms prove cost-effective. The conclusions on the consultation are due to be set out at Budget 2026.

How we can help

If you are undertaking, acquiring, or planning a development involving contaminated or derelict land, our tax specialists can help you assess whether Land Remediation Relief may be available, identify and evidence qualifying costs, and consider how the proposed reforms could affect the timing and value of your claim. If you would like to speak to one of our experts to find out more about how we can help, please get in touch via the form below.