What is LRR?
LRR is a corporation tax relief aimed at incentivising the regeneration of brownfield land. It provides an additional 50% deduction for eligible revenue expenditure on top of the 100% deduction normally available. There is also a 150% deduction for eligible capital expenditure. Loss making companies can claim a 16% below-the-line cash tax credit.
Given that the government has a target to build 1.5 million new homes over the next five years, the proposals would be of particular benefit to housebuilders.
Alignment with planning processes
The current definition of contaminated land is based on whether specific contaminants are present. The government proposes to align LRR with the common definitions, guidance and legislation used by local authorities during the planning process. The government believes that this would lead to a single set of remediation requirements, as summarised below.
Proposed single set of requirements
- Stage one: Developer buys contaminated brownfield land, conducts pre-application work and applies for planning permission to develop site.
- Stage two: Local authority sets pre-commencement conditions for what remediation activity is required to remove contaminants for planning permission to be granted, in accordance with relevant legislation and guidance.
- Stage three: Developer conducts remediation activities, recording expenditure in accordance with local authority and LRR requirements.
- Stage four: Local authority confirms remediation activity has been completed and issues discharge notice of pre-commencement conditions.
- Stage five: Business claims LRR, providing HMRC with relevant documentation and discharge notice confirming remediation has taken place.
The consultation also sets out an alternative sequence of requirements for businesses carrying out development activity which doesn’t require planning permission.
Definition of derelict land
At present, land is only treated as derelict if it has been continuously so since 1998. The government has acknowledged that this requirement is reducing the practical reach of the relief and its ability to incentivise remediation of derelict land more broadly.
The government proposes to replace this requirement with a more comprehensive definition of derelict land which includes requirements that:
- the land contains buildings and other structures which by reason of abandonment or other causes prevent the land from being brought back into productive use;
- the land is not held for future development or disposal by the same economic entity for over five years; and
- it is not currently being used, for example, for parking, storage, access, advertising, open space or recreation.
Although LRR generally provides for 150% tax relief for qualifying expenditure, land becoming derelict after 2027 would attract less valuable appropriate incentives for development.
Timing of the relief
The government is also exploring a reform which would allow companies to treat any qualifying expenditure as a deduction in the year in which the expenditure is incurred. This would be of particular interest to property developers that tend to hold revenue development costs as ‘stock’, in which case the costs are only relieved against taxable income when the relevant units are sold.
A package of reforms
The government considers that a package could be introduced which includes all three areas of reform and seeks views on how these could work in tandem to be better unlock brownfield remediation and development.
The government will also look to implement transitional arrangements so that companies could continue to claim relief for qualifying expenditure incurred on or before a given date as part of this transition period, before moving over fully to the reformed relief.
Have your say
ICAEW intends to respond to the consultation. If you have any views you would like us to consider as part of our response, please e-mail these to richard.jones@icaew.com by Monday, 10 August 2026. The consultation closes on 21 September 2026.
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