Land Remediation Relief: How Companies Get 150% Relief on Contaminated and Derelict Land
Land Remediation Relief is a corporation tax relief that lets a company deduct 150% of what it spends cleaning up contaminated land, or bringing long-term derelict land back into use: the normal 100% deduction plus an extra 50%. A company that makes a loss can swap the relief for a cash payment from HMRC. It is only for companies, only where the company did not cause the problem, and only for land bought already in that state.
For brownfield development in London, where old industrial uses, made ground, asbestos in the soil and invasive plants are common, the relief can cut the after-tax cost of remediation by a meaningful margin. It is also under review: HM Treasury consulted on reforms in summer 2026, with decisions expected at the Budget on 28 October 2026.
How the relief works
| Feature | Rule |
|---|---|
| Who can claim | Companies within the charge to corporation tax |
| What it gives | A deduction of 150% of qualifying expenditure (100% plus an additional 50%) |
| Revenue spending | The extra 50% is added to the normal deduction |
| Capital spending | Can be deducted at 150% instead of being added to the cost of the land; spending that qualifies for capital allowances is excluded |
| Loss-making companies | Can surrender the loss from the relief for a payable tax credit of 16% of the loss surrendered |
| Contaminated land | Contamination present as a result of industrial activity, causing or capable of causing "relevant harm" |
| Derelict land | Land derelict continuously since 1 April 1998 |
| Polluter pays | No relief if the company caused the contamination or dereliction; a landlord cannot claim where its tenant caused it |
| How the land was acquired | Must have been acquired from a third party already contaminated or derelict |
In HMRC's words, "relevant harm" includes a "significant adverse impact on the health of humans or animals".
What counts as qualifying expenditure
The relief is for spending directly on remediation. HMRC's guidance includes the cost of establishing the level of contamination, and the work of removing, treating or containing it. For derelict land, it is the work needed to bring the land back into use. HMRC's Corporate Intangibles, Research and Development Manual sets out the detail line by line, and a claim should follow it.
Spending that would have happened anyway, such as normal foundations, basements dug for the scheme, or general clearance, is not remediation. Work paid for by a grant or other subsidy is excluded.
Natural contaminants and Japanese knotweed
The relief is aimed at industrial contamination, but HMRC's manual makes specific exceptions for naturally occurring arsenic and arsenical compounds, radon, and Japanese knotweed. For knotweed there is a twist: relief "is no longer available where material containing Japanese knotweed is taken to landfill", while other methods, including off-site treatment centres, still qualify. A company that owns the land and fails to deal with knotweed can itself be treated as the polluter.
How and when the relief is claimed
The relief is claimed in the company's corporation tax return for the period in which the deduction arises. That timing is the part developers most often misjudge:
- A developer building to sell treats remediation as part of the cost of its trading stock. Under the current rules the deduction follows the stock, so it usually arrives when the finished units are sold, which can be years after the money was spent. The 2026 consultation proposes letting developers deduct when the spending is incurred instead.
- An investor holding the land can deduct revenue spending in the period it is incurred. Capital spending needs an election to be treated as a 150% deduction rather than added to the cost of the land.
- A loss-making company decides whether to carry the loss forward or surrender it for the 16% payable credit, which helps cash flow on a scheme that has not yet sold anything.
Keep the site investigation reports, the remediation strategy, the contractor's itemised account and evidence of how and when the land was acquired. HMRC can ask for all of them.
The 2026 reform
On 13 July 2026 HM Treasury and HMRC published a consultation on reforming the relief, which closed on 21 September 2026. Budget 2025 had made no changes, and a summary of an earlier consultation was published in June 2026. The proposals include:
- Contamination tied to planning. Eligibility would follow the local planning and land contamination frameworks, with a simpler list of contaminants for development without planning permission.
- A new test for derelict land. The 1 April 1998 date would be replaced, and the government is considering reducing the rate to 100% for land that becomes derelict after 2027.
- Earlier deductions for developers. Developers could elect to deduct qualifying revenue spending when it is incurred, rather than when the finished units are sold.
The government said it would decide at Budget 2026 and legislate through the next Finance Bill, with transitional rules under consideration. Anyone appraising a brownfield site now should model the relief on today's rules and check the outcome of the 28 October 2026 Budget before relying on it.
Worked example
Illustrative example only, round numbers, not a real site.
A development company buys a former industrial site in London, already contaminated by a previous owner's use. It spends £500,000 on qualifying remediation as part of a housing scheme.
| Without the relief | With the relief | |
|---|---|---|
| Deduction for remediation | £500,000 | £750,000 |
| Tax saved at 25% | £125,000 | £187,500 |
| Net cost after tax | £375,000 | £312,500 |
If the company is loss-making in that period, it can instead surrender the loss for a payable credit of 16% of the amount surrendered. HMRC's rules cap how much of the loss counts.
Who qualifies, and the pitfalls
| Situation | Relief available? | Common pitfall |
|---|---|---|
| Developer company buys a contaminated former industrial site | Yes | Claiming on normal groundworks that would have happened anyway |
| Company cleans up land it contaminated itself | No (polluter pays) | Landlord claiming where its own tenant caused the contamination |
| Individual or partnership developer | No | Relief is for companies only |
| Knotweed removed to landfill | No | Choosing landfill without checking the tax effect |
| Knotweed treated on site or off site | Yes | Delaying treatment, so the owner becomes the "polluter" |
| Site derelict for years, but used after 1998 | No under current rules | Assuming any long-vacant site qualifies |
| Remediation funded by a grant | No, for the funded part | Double-counting grant-funded work |
Make it count in the appraisal
The relief is worth most when it is planned: a site investigation that separates contamination from normal ground conditions, a remediation strategy agreed with the planning authority, and a cost plan that shows remediation as its own line. That is what lets a tax adviser defend the claim.
We run brownfield and redevelopment schemes from feasibility through construction. Our development feasibility and site appraisal work prices abnormal costs such as remediation before you commit, and our commercial property redevelopment and repurposing and warehouse conversion teams deliver the build. For how abnormal costs flow into land value, see GDV and residual land value explained, and for the trading company question behind the relief, our guide to trading versus investment. Our free Investor & Developer guide sets out how we work with investors.
