Land remediation relief: 150 per cent for contaminated and derelict land, the tests in order, and the reform on the table
A company that acquires contaminated or long-derelict land and pays to deal with the problem can deduct 150 per cent of the qualifying cost, or, if it is making losses, turn part of the loss into a cash credit. Individuals cannot claim at all, and each of the conditions has sunk claims that looked obvious. In July 2026 the Treasury published proposals to change the derelict land rules and the timing of relief for developers, with responses due by 21 September.
What the relief gives, and to whom
Land remediation relief is in Part 14 of the Corporation Tax Act 2009, and HMRC's manual opens with the point that decides a great many cases before anything else is looked at: it is a relief from corporation tax only. A landlord or developer operating in their own name, or through a partnership of individuals, has no claim, however contaminated the land. For a company, qualifying revenue expenditure receives the ordinary 100 per cent deduction plus an additional deduction of 50 per cent. Qualifying capital expenditure, which would normally get no deduction at all, can be treated as deductible if the company elects within two years of the end of the accounting period in which it was incurred, and it then receives the same 150 per cent. Capital expenditure that qualifies for capital allowances is excluded, so there is no double relief. A company that makes a loss can surrender the part of it attributable to the relief for a payable tax credit of 16 per cent. The loss that can be surrendered is the unrelieved loss or, if less, 150 per cent of the qualifying expenditure, and the unrelieved loss is what remains after setting it against the company's other profits of the same period and after any group relief surrendered. The credit is not taxable income.
Test one: who caused the problem
The relief follows a polluter pays principle. Section 1150 denies it where the land is in a contaminated or derelict state wholly or partly as a result of anything done, or omitted to be done, at any time by the claimant company or by a person with a relevant connection to it. It is also denied where someone else caused the problem and that person, or someone connected with them, still holds an interest in the land, including an option over it, which is how the Treasury's own description of the rules comes to say that a landlord cannot claim for contamination caused by its tenant. HMRC describes the relief as being for cleaning up land acquired from a third party in a contaminated state, and for a company that has held a site since before the contamination arose, that is usually the end of the matter. This is the first thing to establish on any acquisition, and it is established from the site history rather than from the company's own records.
Test two: contaminated in the statutory sense, which is narrower than the planning sense
Land is in a contaminated state for this purpose only if, because of something in, on or under it, relevant harm is being caused or there is a serious possibility that it will be. Relevant harm means the death of, or significant injury or damage to, living organisms; significant pollution of controlled waters; a significant adverse impact on the ecosystem; or structural or other significant damage to buildings. Two exclusions then do most of the work. Living organisms, decaying matter from living organisms, air and water do not make land contaminated. Nor does anything present other than as a result of industrial activity. A Treasury order restores three items that those exclusions would otherwise shut out: naturally occurring arsenic and arsenical compounds, radon, and Japanese knotweed. Knotweed has its own rules. It need not have been present when the land was acquired, so an infestation that arrives later by natural spread or fly-tipping can qualify, but a company that planted it or let it spread cannot claim, and HMRC's guidance says relief is no longer available where material containing knotweed is taken to landfill. Asbestos in a building can also qualify where it causes relevant harm and the claimant company is not the polluter, and HMRC accepts that the additional costs of complying with the asbestos regulations, such as employing a licensed contractor for high-risk material, form part of the cost of removing it.
Test three: derelict land and the 1998 date
The second limb of the relief covers long-term derelict land. Land is derelict only if it is not in productive use and cannot be put into productive use without removing buildings or other structures. It must have been derelict throughout the period since the earlier of 1 April 1998 and the date the claimant company, or a connected person, acquired it. For a site bought recently, that means continuously derelict since 1998, which the Treasury itself now concedes describes a shrinking pool of land. The qualifying work is a closed list and HMRC says in terms that it does not operate by analogy: removing post-tensioned concrete heavyweight construction, building foundations and machinery bases, reinforced concrete pile caps, reinforced concrete basements, and redundant services below ground. Clearing a derelict site of anything else, however expensive, is outside this limb.
Test four: only the extra cost qualifies
Even on a qualifying site, not everything spent there is qualifying expenditure. The cost must be one that would not have been incurred had the land not been contaminated or derelict, which in practice means the additional cost the condition causes rather than the whole cost of groundworks that a clean site would also have needed. It must be on staff, materials or subcontracted work directly employed in the remediation. It must not be subsidised, and it must not be landfill tax. A site investigation report that separates what the contamination requires from what the development requires anyway is therefore worth more than a stack of invoices, because it is the evidence for the only figure that attracts relief.
An illustrative claim
The following figures are illustrative and not drawn from any client matter. A property investment company buys a former engineering works to build industrial units for letting. The contamination report attributes GBP 400,000 of capital expenditure to excavating and treating soil contaminated with hydrocarbons by the site's industrial past, over and above the ordinary groundworks. The company elects within the two-year window. Its deduction is GBP 600,000. If its other taxable profits for the period are GBP 900,000 and it pays corporation tax at the main rate of 25 per cent, the relief saves GBP 150,000 in that year. Without the election, capital remediation of this kind would have produced no deduction at all during ownership. Now suppose instead that the company's other profits are only GBP 100,000. The GBP 600,000 deduction produces a loss of GBP 500,000 once those profits have been absorbed. The surrenderable amount is the lower of that GBP 500,000 and 150 per cent of the expenditure, GBP 600,000, so it is GBP 500,000, and the credit is GBP 80,000 in cash. Carried forward instead, the same loss could be worth up to GBP 125,000 at 25 per cent, but only when there are profits to use it against. Which is better is a cash-flow question, not a tax one. A developer holding the land as trading stock sits differently: its remediation costs are part of the cost of the units and, as the Treasury's consultation document puts it, are relieved only when the units are sold, often years later.
What the July 2026 consultation proposes
On 13 July 2026 the Treasury published a consultation, Reforming Land Remediation Relief, following an earlier consultation in 2025 after which the government concluded that the relief is not fully achieving its objective. Three changes are proposed, individually or as a package. The first would replace the tax-specific definition of contamination with the definitions local authorities already use in the planning process, so that a developer would claim once the authority discharges the pre-commencement condition requiring remediation, with a streamlined list retained for work that never goes through planning. The second would remove the 1998 date for derelict land and replace it with a new definition requiring the buildings or structures to be remnants of earlier development that prevent productive use by reason of abandonment, redundancy, substantial damage, structural unsoundness or advanced disrepair. Land that is merely vacant, underused or awaiting redevelopment would not count, nor land held for development or disposal by the same economic entity for over five years, nor land usable without demolition, nor land in any interim use such as parking or storage. The 150 per cent rate would stay for long-term derelict land, including sites made derelict after 1998, but the government is considering 100 per cent for sites made derelict after 2027. The third would let developers elect to take the deduction when remediation expenditure is incurred rather than when the units are sold. Nothing has been decided. The government says it will proceed only if the reforms are cost-effective, will announce its conclusion at Budget 2026, and expects to legislate in the Finance Bill that follows, taking effect as soon as practicable. It has also said that, if it goes ahead, it would look to let companies continue claiming under the existing rules for expenditure incurred up to a given date. Responses are due by 21 September 2026, to LRR@hmtreasury.gov.uk.
What to do with this now
For a company holding or buying brownfield land, three things are worth doing regardless of how the consultation lands. Establish the site history on acquisition and keep it, because the polluter test and the 1998 test are both answered from the past. Commission the contamination report so that it separates the additional cost of remediation from the development cost, and ask the contractor to invoice on the same split. And diary the two-year election for capital expenditure, because a missed election turns a 150 per cent deduction into nothing. For anyone buying such land personally, the relevant question comes before exchange, not after completion: whether the acquisition should sit in a company at all, weighed against every other consequence of that choice. And if a derelict site was ruled out because it has not been derelict since 1998, or a development timetable is being held up by the gap between spending and relief, the consultation is asking for exactly that evidence, and it closes at 11.59pm on 21 September 2026.
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This article is general information only and does not constitute tax advice. Figures and dates are current as at the date of writing; any worked example is illustrative. Always consult a qualified adviser before acting.