Freeports are secure zones based around regional sea, air and rail ports where business can be carried out inside a country’s land border, but where different customs rules and other favourable arrangements apply.
Following the UK’s exit from the EU the Government is reintroducing Freeports with the objective of:
- Promoting regeneration and job creation in deprived areas as part of its broader “levelling up” agenda
- Creating new national hubs for global trade and investment
- Creating hotbeds for innovation
In the UK Chancellor’s Budget on 3 March 2021 eight new Freeports were announced following a competitive bidding process. They will be in East Midlands Airport, Felixstowe & Harwich, Humber, Liverpool City Region, Plymouth and South Devon, Solent, Teesside and Thames.
Discussions continue between the UK Government and the devolved administrations to ensure the delivery of Freeports in Scotland, Wales and Northern Ireland as soon as possible.
A Freeport must be contained within a 45km diameter outer perimeter, unless a special case can be demonstrated.
No more than 600 hectares of that can be designated as being where the tax incentives that are on offer apply.
Land purchased for a ‘qualifying use’ in these zones will be free of stamp duty land tax until 30 September 2026.
100 percent enhanced capital allowances for expenditure on plant and machinery up to 30 September 2026.
10 percent Structures and Buildings Allowance (usually 3 percent per annum) for expenditure incurred within these designated tax sites provided that the structure or building is brought into use on or before 30 September 2026.
Full Business Rates relief for five years will apply in Freeport tax sites in England. This will be available to all new businesses, and certain existing businesses where they expand, until 30 September 2026.
Customs and trade benefits
Simplified import procedures will apply.
Tariffs and import VAT on goods brought in from overseas will be suspended, unless and until the goods enter the domestic market.
Where raw materials/components brought into the Freeport are processed into finished goods in the secure zone and then re-exported no UK tariffs or import VAT will apply (subject to exporter choice where free trade agreement ‘Duty Drawback Prohibition’ clauses apply).
Raw materials can be imported tariff free into the Freeport, manufactured, and then brought into the domestic UK market at lower finished goods tariff rates, where applicable resulting in a ‘duty inversion’ benefit.
Job creation incentives
Relief from employer’s NIC for eligible employees based in Freeports from April 2022, or as/when a site is designated if later. Available until at least April 2026 and, subject to review, to April 2031.
The employer NIC incentive is a 0 percent rate for 3 years per employee on up to £25 thousand p.a. of earnings.
£175 million seed capital pot to provide matched/part matched public funding for investment in regeneration of sites and qualifying infrastructure.
Streamlined planning process to aid brownfield site development and increased regulatory flexibility for carrying on innovative activities.