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Targeting Land Remediation Relief to get Britain building again

Labour’s manifesto included several key points in respect of housebuilding and the provision of affordable housing, including a pledge to build 1.5 million new homes. Whilst promising a ‘brownfield first’ approach, Labour also pledged to prioritise the release of lower quality grey belt land for development, including areas like car parks.

Brownfield land is land that has previously been used for industrial or commercial purposes and may be polluted as a result of those activities. It accounts for around 8.7% of land in England and 54% of new homes built in 2021/22 were on brownfield land, but brownfield and grey belt land is often more complicated to redevelop and less commercially viable than greenfield land. Targeted use of the tax system can remove barriers to redevelopment and incentivise regeneration. One particularly generous, but underutilised tax relief which was introduced to incentivise the regeneration of brownfield sites is Land Remediation Relief (LRR).

Currently, LRR offers a 150% corporation tax deduction on qualifying expenditure for cleaning up contaminated land and bringing derelict land back into use in the UK. Non-profitable companies can claim a 16% tax credit on qualifying expenditure. This relief is potentially available to both developers and investors. As a tax relief that incentivises sustainable development and regeneration, it aligns with Labour’s housing, construction and economic growth plans.

However, the tax relief criteria for LRR includes the ‘polluter pays principle’ meaning the relief will not apply if the company or someone connected to the company are responsible for contamination or dereliction. While this principle makes sense, the legislation is broadly drafted and sometimes fails in practice.

In broad terms here are three examples where the legislation restricts relief for redevelopment.

To address this, along with other shortcomings and truly incentivise regeneration of previously used land, the Chancellor could take a few simple steps in this month’s Budget.

Our final ask would be that the government then commit to leaving this legislation untouched for the remaining parliamentary term, allowing businesses to have confidence to make long-term investment decisions that take account of the tax reliefs available.

authors:soraya-yarkhan,authors:rupert-guppy