Land Remediation Relief: Government signals reform following review

Businesses developing brownfield sites could see changes to Land Remediation Relief (LRR) after the government confirmed there is a “compelling case” for reform following its recent consultation.

The review, first announced at Budget 2024, considered whether the existing relief is achieving its aim of encouraging the regeneration of brownfield land and reducing pressure to develop greenfield sites. Following feedback from developers, advisers, industry bodies and other stakeholders, the government has concluded that while the relief remains valuable, changes may be needed to make it more effective.

Land Remediation Relief is a Corporation Tax relief designed to support companies that bring contaminated or derelict land back into productive use.

The relief can provide an additional deduction against taxable profits for qualifying expenditure, helping businesses manage some of the costs associated with preparing difficult sites for development.

Eligible work can include activity to prevent, minimise or address contamination, as well as certain costs associated with bringing long-term derelict land back into use.

The consultation found that, although Land Remediation Relief can make a difference for some projects, particularly marginal sites with significant contamination issues, there are concerns that the current system is not working as effectively as intended.

Respondents highlighted several challenges, including:

• uncertainty over what costs qualify
• complexity when preparing claims
• difficulties gathering evidence and separating eligible costs
• restrictions within the current rules
• lack of awareness among some businesses

One of the main findings was that the relief is often considered too late in the development process. Many businesses only review eligibility once work has been completed, by which point qualifying costs may be harder to identify and evidence.

Stephen Martin, Tax Partner at Old Mill, said: “The consultation findings recognise what many businesses and advisers have experienced in practice: Land Remediation Relief has an important role to play, but the current regime does not always make it easy for businesses to access support.

“Bringing brownfield, contaminated or derelict sites back into productive use can involve significant cost and uncertainty. Reforming the relief provides an opportunity to make the regime more effective and better aligned with the challenges developers face when taking on these projects.

“While we need to wait for the detail of any proposed changes, it is positive to see the government engaging with industry on how Land Remediation Relief can better support the regeneration of these sites.”

A key theme from the consultation was whether the existing rules reflect the reality of developing brownfield land today.

For example, respondents raised concerns that the definition of derelict land is too restrictive, particularly the requirement that land must have been derelict since 1 April 1998. As time passes, proving this can become increasingly difficult.

The consultation also highlighted concerns around qualifying activities, with some remediation work currently excluded from relief despite being important to bringing sites back into use.

While no immediate changes have been announced, the government has confirmed it will continue discussions with industry to explore potential reforms.

For businesses involved in property development, construction or investment, any changes could be significant.

A simplified system could:

• make it easier to identify qualifying expenditure
• give businesses more certainty at an earlier stage
• improve access for smaller developers
• better support decisions around brownfield development

However, until further details are announced, businesses should continue reviewing potential claims under the existing rules.

One of the strongest messages from the consultation is the importance of considering Land Remediation Relief early.

Because qualifying costs can be difficult to identify retrospectively, businesses should consider potential claims before and during remediation projects, rather than waiting until after completion.

Keeping clear records, understanding what activity may qualify and seeking advice early can help businesses maximise available relief while reducing the risk of errors.

While reform may be coming, Land Remediation Relief continues to provide valuable support for businesses taking on complex sites.

If you are acquiring, developing or remediating land and would like to understand whether relief may be available, speak to Stephen Martin or your usual Old Mill adviser.

View the full consultation document here.