Guidance published on Freeport tax reliefs

New HMRC guidance published on capital allowance, structures and buildings allowance, and SDLT tax reliefs available in Freeport tax sites.

New HMRC guidance published on capital allowance, structures and buildings allowance......

At Spring Budget 2021, the Chancellor announced the introduction of eight new Freeports in eight English regions and at the Autumn Budget, secondary legislation was published to formally designate the first tax sites at the Humber, Teesside, and Thames Freeports. HMRC have now published guidance on certain tax incentives available in Freeport tax sites, including the 100 percent enhanced capital allowance for companies investing in plant and machinery, the new 10 percent rate for the structures and buildings allowance (SBA) and stamp duty land tax (SDLT) Freeports relief. Guidance has also been published to help taxpayers check if goods can be moved into, or stored, in a Freeport customs site.

Enhanced capital allowance relief

HMRC have published guidance to help taxpayers understand if they can claim the enhanced capital allowance relief in Freeport tax sites.

The enhanced capital allowance applies to new plant and machinery acquired by companies within the charge to corporation tax for use as part of a trading activity and primarily for use in a designated Freeport tax site. The enhanced capital allowance provides a 100 percent deduction in the first year against profits from the qualifying activity.

The relief is available from the date a Freeport tax site is designated until 30 September 2026. However, the relief may be withdrawn where the plant and machinery ceases to be for primary use in a Freeport tax site during its first five years of use.

Enhanced SBA relief

New guidance has also been published to help taxpayers check if they can claim the new 1 percent rate for the SBA on qualifying expenditure on structures and buildings in Freeport tax sites.

The 10 percent relief is available to corporation and income taxpayers and is available where they begin construction of a building or structure, incur qualifying expenditure and bring the building or structure into qualifying use in a Freeport tax site on or before 30 September 2026.

An allowance statement must be prepared in order to claim the relief stating that the taxpayer wants the expenditure to be Freeport qualifying expenditure. Apportionment between the enhanced rate of SBA and the normal rate of SBA might be required where part of the building is outside of the Freeport tax site or where part of the building is brought into qualifying use after 30 September 2026.

SDLT Freeports relief

HMRC’s SDLT manual has been updated with a new chapter on SDLT Freeports relief, which is available for certain acquisitions of land and buildings in designated Freeport tax sites, where the interest acquired is used in a ’qualifying manner’ and that acquisition is prior to 30 September 2026.

Very broadly a qualifying manner is for use in a trade or profession, to be held as an investment where the tenant will use the property in their trade or profession, or to be redeveloped for the purpose of being used in a trade or profession. Residential use is non-qualifying as is the acquisition of property for resale without any redevelopment.

Partial relief is available where the acquisition is a mixture of qualifying Freeport land and other property acquisitions, broadly where more than 10 percent of the land is qualifying Freeport land.

When can goods be moved into a Freeport customs site?

In addition to the new guidance on Freeport tax reliefs, HMRC have also published guidance for taxpayers regarding when goods can be moved into, or stored in, a Freeport customs site.

The guidance sets out that goods can be moved into, or stored in, a Freeport customs site if they are not excluded goods, and either:

  • They are not controlled goods; or
  • They are controlled goods, but are being moved or stored under a different customs special procedure that the taxpayer is authorised to use, other than the Freeports customs special procedure.

The guidance then goes on to provide links and some examples of controlled and excluded goods.