Freeport tax incentives

Among the development measures the Chancellor announced in the March Budget were eight new freeports in England. These are due to enter operation in late 2021, with each freeport including a defined tax site within which a range of tax incentives and reliefs for businesses will apply. These tax breaks will mostly last for five years.

Discussions are ongoing regarding the creation of freeports in Scotland, Wales and Northern Ireland. Businesses operating within a freeport’s tax site will benefit from several incentives:

  • Enhanced capital allowances - Investment in plant and machinery that is new and unused will qualify for a 100% deduction against profits, regardless of whether the expenditure falls into the main or special rate capital allowances pool. The assets purchased must primarily be for use within the freeport tax site. Relief will be available from when a site is designated until 30 September 2026.
  • 10% rate of structures and buildings allowance - This enhanced rate will mean that investment in non-residential structures and buildings within a freeport tax site will be written off over ten years rather the usual 33⅓-year period. To qualify, the structure or building will have to be brought into use by 30 September 2026.
  • Relief from stamp duty land tax - Land and property purchased in an English freeport tax site and used for a qualifying commercial purpose will benefit from 100% relief, with relief available from designation until 30 September 2026.
  • Business rates relief - Full relief will be available for all new businesses and certain existing businesses where they expand. Relief will apply for five years from the point at which relief is first given.
  • Employer NICs - Still to be confirmed, but the intention is to give full relief from employer NICs for employees working in a freeport tax site. Relief will run from April 2022 (or when a site is designated) to April 2026 but could be extended until April 2031.

The government published a series of questions and answers following the freeport bidding process which can be found here.

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