In the Budget on 3 March 2021 the Chancellor announced the reintroduction of Freeports in England. In the past, 7 Freeports had operated in the UK between 1984 and 2012. Freeports are specific designated areas where the normal tax and customs rules do not apply. Under the new proposals a business will be able to import goods into a Freeport without paying tariffs, process the goods into their final form and then either pay a tariff on goods sold within the UK, or export them without paying any UK tariffs. The government has stated that the policy of creating Freeports is a key part of its plans to rebalance economic equality around the country. The benefits for businesses situated within a Freeport are reduced taxes as they will be able to claim enhanced allowances; zero business rates for up to 5 years; and lower tariffs and customs obligations.
8 ports in England are to become Freeports. They were selected from 18 areas in England which had made bids to become Freeports, and the key factors in deciding which areas were to become Freeports were:
- How the Freeport would bring economic opportunities to poorer areas to help raise economic standards within those areas;
- Ensuring that Freeports are spread fairly across the country, and
- The impact of Covid-19 on the area.
The 8 Freeports situated around:
- East Midlands airport
- Felixstowe and Harwich
- Humber region
- Liverpool City Region
It is expected that Scotland, Wales and Northern Ireland will announce their own policies for Freeports.
Businesses within Freeports will be able to benefit from the following tax advantages:
- 100% enhanced capital allowances (“ECA”) on plant and machinery for the tax period in which the expenditure is incurred. The ECA will be claimable for expenditure incurred from the date the Freeport tax site is designated up to 30 September 2026.
- Enhanced Structures and Buildings Allowance (“SBA”) instead of the standard flat rate allowance of 3% per annum. Businesses will be able to claim the allowance at the flat rate of 10%. This will be available for qualifying assets brought into use after the Freeport site has been designated and on or before 30 September 2026.
- Full relief from Stamp Duty Land Tax for purchases of land and buildings within a Freeport tax site, subject to a control period of up to 3 years, and the land being acquired and used in a qualifying manner. This relief will be available to qualifying transactions with an effective date from the date the date the Freeport tax site is designated up to 30 September 2026.
- Full business rates relief to all new businesses and some existing businesses which have expanded.
The government is also proposing to introduce full relief from employer’s NIC on salaries paid to new employees within a Freeport. This 0% employer’s NIC rate would be applicable for up to 3 years per employee on earnings up to a£25,000 per annum threshold. It is anticipated that this relief will be introduced with effect from April 2022.