Land Remediation Relief (LRR)

Land Remediation Relief (LRR) is intended to encourage businesses to remediate contaminated land in order to make it suitable for development or other uses. The relief applies to property investment and development activities and is available for both commercial and residential properties.
LRR is a generous tax incentive allowing companies to claim 150% of eligible remediation costs. This is achieved through a combination of a 100% standard deduction via the Profit and Loss (P&L) account and an additional 50% deduction under LRR. Eligible costs include those associated with remediating contaminated land or buildings.
Contaminated Land and Buildings
Land and buildings are considered contaminated if they were previously used for industrial purposes and the contamination still poses a potential risk. Contaminated land can also include areas with natural pollutants, such as arsenic, radon, or Japanese knotweed.
The relief also covers the removal of hazardous materials such as:
Asbestos
Post-tensioned concrete
Building and machinery foundations
Below-ground redundant services (e.g., pipes, wiring, tunnels)
Conditions for Eligibility
To qualify for LRR, the claimant must meet certain conditions:
The land must be located in the UK.
The land must be acquired for trading or property rental purposes.
The claimant cannot be the original polluter of the land.
The claimant must be a UK company with a significant interest in the land, either by holding the freehold or a leasehold for at least seven years.
No grants or subsidies should have been received, and the purchase price of the land should not have been reduced due to its contaminated state.
Types of Relief
LRR can provide corporation tax relief in two ways, depending on whether the company is making a profit or a loss.
For Profit-Making Companies: Enhanced qualifying expenditure can be deducted from the company’s profits, reducing the corporation tax liability. The relief allows a company to deduct 150% of qualifying costs.
Example: If a company spends £100,000 on land remediation, they can claim an additional £50,000 deduction. With the current corporation tax rate of 25%, this results in a tax saving of £37,500, rather than £25,000 if no relief were available.
For Loss-Making Companies: Loss-making companies can surrender their tax loss for cash. The tax credit is available at 16% of the lower of:
The tax loss created, or
150% of the LRR expenditure.
Example: A company with a trading loss of £200,000 and qualifying expenditure of £100,000 can receive a tax credit of £24,000, which is calculated as £150,000 (the lower of the tax loss or the LRR expenditure) multiplied by 16%.
Qualifying Costs
Qualifying costs are those directly related to cleaning up contaminated or derelict land. For contaminated land, qualifying costs include:
Costs of establishing the level of contamination
Staff or subcontractor costs for those involved in remediation
Costs of materials used in the remediation process
For derelict land, the following costs are considered qualifying:
Removal of post-tensioned concrete and heavyweight construction
Removal of building foundations and machinery bases
Removal of reinforced concrete pile caps and basements
Removal of redundant underground services, such as pipes, wiring, and tunnels
Speak to an Expert
LRR offers a generous tax incentive for companies involved in land remediation. If you believe your company may qualify for this relief, please get in touch with our tax team for an obligation-free consultation to determine if your company meets the requirements.
Authored by: London Team