L-Day: Consultation on Land Remediation Relief

HM Treasury launched a consultation on reforming Land Remediation Relief (LRR) alongside the various draft Finance Bill clauses that were published on L-Day. The consultation seeks views from businesses and advisers to explore the viability and effectiveness of the proposed reforms in response to the Summary of Responses issued at Tax Update 2026. The deadline for responding is 21 September 2026.

LRR is a corporation tax relief intended to encourage the cleanup and reuse of contaminated or derelict land.

The relief provides:

• 150 percent deduction on qualifying capital expenditure;
• Additional 50 percent deduction on qualifying revenue expenditure; and
• 16 percent tax credit for loss-making companies.

It is particularly relevant for:

• Property developers and investors;
• Businesses acquiring and remediating operational sites; and
• Groups undertaking brownfield regeneration, including housebuilders.

The proposed reforms aim to make LRR more effective, simpler to access and better aligned with planning processes.

Aligning LRR with planning and environmental processes

A central proposal is to align LRR more closely with planning and environmental legislation and the processes used by Local Authorities (LAs). The key elements are:

• Eligibility definitions for contamination would be brought closer to those used by planners and environmental regulators;
• Expanded contaminant list, potentially covering a broader set of substances commonly encountered on brownfield sites; and
• Use of LA discharge notices as primary evidence for HMRC, reducing the need for bespoke tax-focused documentation and improving certainty over eligibility.

Reforming relief for derelict land

LRR currently includes relief for certain derelict land, but the rules are seen as outdated and restrictive - notably the requirement that land must have been derelict since 1 April 1998.

The consultation explores:

• Removing the fixed 1998 date test, replacing it with a more practical, activity-based test; and
• A new definition of derelict land, focusing on whether:
  • the land is not in productive use; and
  • it cannot be brought into productive use without removing long-standing remnants of previous development (e.g. foundations, infrastructure).

HM Treasury is also considering:

• Differentiated rates of relief depending on when land became derelict; and
• Safeguards to prevent misuse, for example where land is deliberately allowed to deteriorate to qualify.

This could broaden eligibility while requiring careful factual analysis of site history and use.

Accelerating timing of relief for developers

Under current rules, property developers often only realise LRR when units are sold, leading to an often lengthy delay between incurring remediation costs and accessing relief as well as complex tracking requirements.

Proposed changes:

• Allowing LRR to be claimed in the year the expenditure is incurred, rather than on disposal of units.

Key implications:

• Improving cash flow and reducing long-term administrative tracking of costs through multi-year projects; and
• Introducing requirements to recognise deferred tax liabilities and mechanisms to prevent double relief where income is later recognised.

Package, anti‑avoidance and transitional rules

The Treasury is considering whether to:

• Implement reforms individually; or
• Introduce a combined package of changes to definitions, timing and evidence requirements.

There will be transitional arrangements to move from the existing regime to any new rules, and anti‑avoidance provisions to ensure that LRR continues to target genuine remediation and regeneration activity without overlap with other reliefs.

These proposed reforms aim to demonstrate that HM Treasury is listening to concerns that the current approach to LRR can be restrictive in its effectiveness at encouraging brownfield land development. It signals a willingness to make LRR more accessible, better targeted and more closely aligned with the practical realities of brownfield development.

For further information please contact:

• Ryan Ballantyne
• Fiona Nash