A bidding process in England is expected to open before the end of the year with sea, air and rail ports invited to bid for freeports status.
On 7 October 2020, the Government published its response to the recent consultation on freeports. HM Treasury also announced the next steps which involve a freeports bidding process in England opening before the end of the year, with sea, air and rail ports invited to bid for freeports status and the first freeports on track to be open by the end of 2021. It was confirmed that freeports will benefit from: “streamlined planning processes to aid brownfield redevelopment; a package of tax reliefs to help drive jobs, growth and innovation; and simplified customs procedures and duty suspensions on goods”. The response document expressed the Government’s desire for “freeport coalitions – of international and local businesses, academic institutions, ports and local authorities – to start forming around what we have announced and to begin to iterate how their region can best meet freeports’ objectives”.
Chapter three of the response document focusses on the proposed freeports customs model.
The operation of the freeport will be ‘duty free’ – simplified declarations will be used for goods entering the freeport and standard import declarations required for freeport goods subsequently entering the UK market or standard export declarations for exports outside the UK.
Manufacturing operations using UK and duty-free goods will be allowed within the confines of the freeport. Duty will only be levied at the point of delivery to the UK market. The duty-free operation of freeports will extend to excise duty with operators following the same excise regimes/processes as the rest of the UK.
In terms of location, there is the requirement for a link between the freeport site and a port – this does not limit the ability of an inland site to bid, “so long as an economic relationship can be clearly demonstrated between the site and the port” and applies equally to what are called ‘customs subzones’ which can operate outside of the main freeport site.
Freeport operators will be required to maintain an inventory of products within the freeport, allowing the authorities to identify and examine goods as required. The detail of the records that must be maintained by the freeport business (rather than operator) will be made clear within the bidding prospectus.
The freeport model fits within the overall government strategy to digitise the border process and make access to customs reliefs and procedures easier and more streamlined.
Chapter four of the response document looks at other tax areas and there is confirmation that the following will apply within freeport tax sites:
However, the Government does not intend to offer a specific research and development (R&D) incentive within freeports (existing R&D incentives will be available to businesses under normal principles).
Very few details on any of the incentives that will be offered have been published yet, including the timescales for those that will be time limited. Interested businesses will need to wait for the bidding prospectus to be published to find out more.
For further information please contact:
© 2020 KPMG LLP a UK limited liability partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
For more detail about the structure of the KPMG global organisation please visit https://home.kpmg/governance.