LRR consultation response

Executive Summary

In the Autumn 2024 Budget, HM Treasury announced its intention to consult on the impact and effectiveness of the land remediation relief legislation.  The consultation was formally issued on 21 July 2025 with a submission date of 15 September.  The Fiscal Incentives Group supported several trade bodies in gathering responses from their members including the Home Builders Federation, the British Property Federation, The Chartered Institute of Taxation, The Environmental Industries Commission and the Environmental Industries Association.  We also issued our own consultation response which can be accessed here.

We fundamentally believe that the case for reform is strong. Despite the pressing need for new homes the tax regime currently favours commercial development over residential development. Whilst capital allowances was not the subject of the consultation there remains a significant disparity between the incentives available to investors through capital allowances and accelerated LRR benefits, and those available to residential developers and housebuilders who are not only unable to claim the LRR until the point of sale but residential investors are also unable to benefit from Structures and Buildings Allowances (SBAs) and to a great extent plant and machinery allowances due to the domestic dwelling exclusion. This disparity in treatment appears to be working against the ambition to build 1.5 million homes and needs to be corrected by creating a more valuable tax incentives regime to help build working capital capacity within the housebuilders and to make the UK more attractive for inward investment.

Background

HM Treasury raised the consultation in response to concerns from some stakeholders that certain aspects of LRR hinder it from driving development of derelict and contaminated land. These included:

1. The design of the relief, including:
   • the activities that qualify for the relief
   • eligibility restrictions, in particular the date from which derelict land must be proven to be derelict in order to qualify
   • the restriction on temporary use for derelict land
   • the ‘polluter pays’ principle
   • the mechanism of support, below-the-line versus an above-the-line credit
2. The impact of the relief, including:
   • the value of the relief, compared with overall development costs
   • when the relief is received
3. HM Treasury had also heard concerns about the relief’s robustness against error and abuse.
4. Evidence of the way in which businesses currently factor the relief into their business plans, and the extent to which LRR is currently achieving its objectives.

The purpose of the consultation was therefore to better understand:

• the impact of LRR on development of brownfield sites
• how the relief is factored into businesses’ decision making
• how effective the relief is, and if it is not, why not
• the extent to which it is robust against abuse
• interaction with other incentives for development of brownfield land, such as grants

Author: Ben de Waal