One of the big announcements in the March Budget was the creation of eight new freeports across England which are due to start operating in 2022. The new freeport area in East Anglia is called Freeport East – and if your business is located within it (whether this be a warehouse, manufacturing facility or office), you might be able to take advantage of a number of tax reliefs, allowances and benefits.
What is a freeport?
As you might guess from the name, freeports are defined geographic areas where businesses can benefit from specific allowances, tax and rates relief and duties reliefs for certain activities carried out within the designated sites. The freeports can be up to 27 miles across, and are usually located around shipping ports, or airports. Goods that are imported from overseas into freeports are not subject to tax charges that would usually need to be paid, and customs declaration processes are simplified.
Government taxes are only paid if the goods leave the freeport and are moved elsewhere in the UK – in which case the full import procedures need to be completed, and taxes will be levied. Otherwise, they can be exported and sent overseas without the tariffs being paid.
Why have freeports been introduced?
The government’s objectives in introducing these freeports are:
- to establish Freeports as national hubs for global trade to encourage investment across the UK: intensify the economic impact of ports by enhancing trade and investment and generating increased economic activity across the UK;
- to promote regeneration and job creation: create high-skilled jobs in ports and the areas around them, prioritising some of the most deprived communities to level up the UK economy; and
- to create hotbeds for innovation: create dynamic environments, capitalising on new ideas and fostering the conditions that will attract new businesses, investors and innovations.
Where is the freeport for East Anglia?
The freeport called Freeport East, is one of eight new freeports announced in the Budget. The freeport will be centred around Bathside Bay in Harwich and the Port of Felixstowe Logistics Park, but the site will also include the new development at Gateway 14 near Stowmarket, and the logistics hub Port One in Great Blakenham on the outskirts of Ipswich.
The Freeport East project is backed by MPs, businesses and local government who have all stated their shared objective to help increase manufacturing, and encourage jobs and investment in East Anglia. The bid team behind Freeport East have estimated that it could create 13,500 jobs and bring in £650 million of investment into the region.
How can local businesses benefit?
Subject to further government guidance, businesses located within the freeport locations should be able to take advantage of enhanced Customs Duty and tax benefits as follows:
Stamp Duty Land Tax
Full relief from Stamp Duty Land Tax (SDLT) on the purchase of land or buildings or on the grant of leases over land or buildings within freeport tax sites in England where it is purchased and used for a qualifying commercial purpose. This relief will be in place until 30 September 2026.
Business rates relief
Full business rates relief available to all new business and certain existing businesses that have expanded within the designated tax site five years from first claiming relief until 30 September 2026.
Enhanced Capital allowances
An enhanced capital allowance of 100% for company investment in plant and machinery for use in freeport tax sites in Great Britain. This will be available for qualifying expenditure incurred on or after the date the tax site is designated until 30 September 2026.
Enhanced Structures and Building Allowances (SBA)
An enhanced 10% rate of structures and buildings allowance for constructing or renovating non-residential structures and buildings within freeport tax sites in Great Britain. This means investments will be fully relieved after 10 years compared with 33 years for properties in other locations which only achieve a 3% rate.
Employer National Insurance Contributions Relief
From April 2022 (or when the tax site is designated, if later than April 2022) until at least April 2026. The government has announced its intention to extend this by up to five years, subject to review.
Various Customs Duty deferral and exemption schemes There will be simplified declaration procedures for goods entering a freeport, and non-controlled goods will be declared via entry in commercial records. Controlled and excisable goods will need to complete a simplified frontier declaration. Import or export declarations will be required for goods leaving a Freeport, and excise duties, duty and import VAT will be suspended when the goods enter a Freeport and payable when they leave. Goods can be bought and sold in a Freeport provided both parties have the same customs authorisation.
What happens next?
Now that the bid has been approved, work has started on planning how Freeport East will become a reality. The next step will be for the project team to submit a business plan and to finalise the governance structure, and it is hoped that the project will become active within eighteen months. More details will be published on the Freeport East website as it becomes available.