Following the UK’s departure from the EU, the Government announced the creation of Freeports. Freeports are a key part of the government’s economic plans. The goal is for Freeports to create jobs, increase international trade, contribute to the regional levelling up agenda and serve as hubs for innovation.
The UK Government’s plan is to deliver a bespoke Freeport model, with a comprehensive package of measures designed to boost trade, employment and innovation. Areas given Freeport status will benefit from tax reliefs, simplified customs procedures, streamlined planning processes to boost redevelopment and government support to promote regeneration and innovation. These benefits add to the Customs Duty benefits under the EU_UK Free Trade Agreement although this does not apply to all of the UK’s other free trade agreements.
The introduction of Freeports represents a fantastic opportunity for companies across every sector and region of the UK. We believe the benefits of Freeports are relevant to all businesses, not just those with import/export operations. We are assisting clients in quantifying the benefits that can be derived from direct and indirect tax benefits as part of an overall supply chain/duty optimisation strategy
- Latest news on UK Freeports - Freeport locations and tax incentives announced
- Tax reliefs, Customs incentives and government support
- Freeports locations
- Freeports; a regional perpsective
- Freeports; a sector perspective
- What are Freeports?
- How will UK Freeports work?
- Webinar: The Solent Freeports
Latest news on UK Freeports
Freeport tax relief extension
The Government announced the extension of Freeport tax reliefs to 30 September 2031 in England, and extended Investment Zone tax reliefs and Freeports from five to ten years in Scotland and Wales (subject to agreement with the devolved administrations). These measures, combined with a £150 million Investment Opportunity Fund supporting Investment Zones and Freeports, should help provide additional certainty for investment in businesses operating in these areas and the associated maritime and transport sector more generally.
Freeport areas will not have uniform rules for the entire area, but will contain tax sites, customs sites and joint tax and customs sites. It is only in these sites that companies will benefit from the tax reliefs and Customs reliefs for operators within the Freeports.
The exact numbers, sizes and locations of these sites will be dependent on each Freeport zone. The zones themselves can have an overall area of up to 45km in diameter.
In this section we have set out the details of the various corporate tax, employment taxes, stamp duty and Duty and VAT reliefs available to companies established in these specific sites within the Freeport zones.
Freeports and Tax reliefs and incentives
Businesses will be able to claim reliefs from key business taxes within the bounds of a Freeport. The current proposals include:
Stamp Duty Land Tax (SDLT) Relief
The government intends to offer SDLT relief on land purchases within Freeport tax sites in England where that property is to be used for qualifying commercial activity. It is intended that this relief will apply from 1 April 2021 until 31 March 2026.
Enhanced Capital Allowances (ECA)
The new ECA the government intends to offer in Freeport tax sites will provide enhanced tax relief for companies investing in qualifying new plant and machinery assets. This accelerated relief is intended to allow firms to reduce their taxable profits by the full cost of the qualifying investment in the same tax period the cost was incurred. Firms investing in the Freeport tax site would be eligible to benefit from the relief where the qualifying investments are incurred on or after 1 October 2021 until 30 September 2026.
Enhanced Structures and Buildings Allowance (SBA)
The government intends to offer an Enhanced SBA rate, providing enhanced tax relief for firms constructing or renovating structures and buildings for non-residential use within Freeport tax sites.
Employment tax incentives and NICs rate relief
The government intends to enable employers operating in a Freeport tax site to pay 0% employer NICs on the salaries of any new employee working in the Freeport tax site. This 0% rate would be applicable for up to three years per employee on earnings up to a £25,000 per annum threshold. An employee will be deemed to be working in the Freeport tax site if they spend 60% or more of their working hours in that tax site.
The relief is intended to be available for up to 9 years from April 2022. Partway through, the government intends to review this relief and decide whether it should be continued up to its end date in 2031. The relief would end no earlier than April 2026 and would therefore be available for a minimum of four years.
Business Rates Relief
The government intends to offer up to 100% relief from business rates on certain business premises within Freeport tax sites. This relief is intended to be available to new and certain existing businesses in Freeport tax sites in England from 1 October 2021 and would apply for 5 years from the point at which the beneficiary first receives relief. The point at which a business first receives relief must be by 30 September 2026. The cost of the relief will be funded by central government. It is intended that newly formed businesses and businesses relocating to a Freeport will be eligible for the relief.
Local Retention of Business Rates It is intended that the council or councils in which the Freeport tax sites are located will retain the business rates growth for that area above an agreed baseline, following the example of Enterprise Zones. This will be guaranteed for 25 years, giving councils the certainty they need to borrow to invest in regeneration and infrastructure that will support further growth.
Freeports and Customs
Businesses operating within Freeport customs sites will receive tariff benefits, including duty deferral while the goods remain on site, and duty inversion if the finished goods exiting the Freeport attract a lower tariff than their component parts.
Under the proposed model, declaration requirements would be simplified to reduce the administrative burden of moving goods into a Freeport. A reduced amount of data would be provided using existing processes (form C21) to allow goods to be cleared to leave a port and businesses would need to complete a declaration into their own commercial records recording information about the goods that will be brought in to the UK. They would also need to provide adequate information to the Freeport operator’s records management system so that a central record of all goods in the site can be maintained.
When businesses wish to remove goods from the site, they would need to complete normal import declarations if releasing the goods for sale on the domestic market or export declarations if exporting the goods for sale overseas. It will be possible for goods to be declared to another customs procedure, such as transit, on leaving the Freeport site.
Businesses bringing goods into the UK via a UK port also need to submit Entry Summary Declarations for safety and security purposes before arrival and submit manifest information to notify the customs authority that the goods have arrived at the port. These processes for goods entering a port will not differ in respect of Freeports.
The Chancellor announced eight locations in England in his March 2021 Budget statement. In January 2023, following discussions with the Scottish government, the UK government announced two additional Freeports in Scotland. These are the Forth Green Freeport and the Inverness and Cromarty Firth Freeport.
Discussions with the devolved administrations in Wales and North Ireland to ensure the delivery of Freeports in those regions are ongoing. The ten UK Freeport locations announced are:
- East Midlands Airport
- Felixstowe & Harwich
- Forth Green
- Humber Region
- Inverness and Cromarty Firth
- Liverpool City Region
- Plymouth & South Devon
Freeports are an important part of the Government’s regional levelling up agenda. The government’s ambition is to drive economic growth, job creation, trade and innovation across England and the devolved regions.
Will Freeports be successful in achieving everything the Government has claimed and what will be the key factors that determine their success or failure?
Freeports; a sector perspective
Freeports represent an invaluable opportunity for leisure and hospitality businesses as they can become destinations for both business and leisure travellers and visitors. A thriving leisure and hospitality sector would also make a significant contribution to the sustainable success of Freeports
What are Freeports?
Freeports operate as secure customs zones, usually located at ports or airports, where business can be carried out inside a country’s land border, but where different customs rules apply.
Countries around the world had adapted this basic model by adding different elements to create their own bespoke Freeports based on the Special Economic Zone (SEZ) concept. Each combines a mixture of customs flexibilities, to provide relief from duties, import taxes and administrative burdens; tax measures to incentivise private investment; regulatory flexibilities; and investment in infrastructure, all concentrated in the geographical area around the Freeport.
The UK Government has opted for a bespoke Freeport model which aims to achieve three objectives:
- To establish Freeports as national hubs for global trade and investment across the UK
- To promote regeneration and job creation
- To create hotbeds for innovation
How will UK Freeports work?
The UK Freeport model will require a primary customs site designated in or near a seaport, airport or rail port within which the customs benefits will apply. Additional Freeport subzones may also be permitted to enable multiple sites to benefit from the Freeports customs model.
Freeports will also include a defined site within which Freeport tax reliefs will apply – operating in a similar way to existing Enterprise Zones. The purposes of the reliefs will be to incentivise business investment in capital assets and employment. However, clear eligibility criteria will apply to prevent tax evasion and avoidance.
Our Advice on Freeports
Michael Simms - Partner
The introduction of Freeports in the UK will create new opportunities, especially for businesses with an import/export orientation. In reality, businesses across shipping, logistics, manufacturing, real estate and construction and many other industries will be able to take advantage of the new regulations and incentives. By boosting trade, jobs, and investment across a number of sites, Freeports can also become hotbeds for innovative companies.
This Freeports hub has been designed to provide you with some initial guidance. We have analysed the potential impact of the various measures that might benefit businesses currently within, or looking to relocate to, a Freeport site. We hope you find it useful.
However, we are still in the early stages of development of the Freeports initiative so you may find it difficult to understand the potential opportunities that Freeports may offer. This is where we can help. We are on-hand to advise and support businesses that want to make the most of Freeports.
Whether you are looking to relocate into a Freeport, trying to assess the potential impact on your business or looking for investment opportunities, we can help you make the right decisions. Our tax teams have significant experience in advising on issues relevant to Freeports such as customs duty, VAT and other indirect taxes, employment taxes and direct taxation. We work with teams of dedicated sector experts who are already working with businesses in your industry and who understand the particular opportunities and challenges you are facing.
Please get in touch if you want to find out more about how we can help.