As UK Freeports Swing Into Action What Do They Offer Those Considering Moving In?

UK – So what good is a Freeport to me? As with other contentious subjects, Brexit, Scottish Independence, Marmite spring to mind, Freeports are viewed cynically by many yet hailed as the saviour of the British economy by others. What, however, do they actually offer?

Looking at the situation around the world the benefits, and drawbacks of Freeports vary considerably. Whilst many act as a magnet for genuine investment and provide a safe space for projects and companies to grow and develop, others are considered hotbeds of criminal activity with large scale smuggling operations and multi-layered tax, duty and other financial and fiscal scams.

As with so many of this current government policies, in the UK there has been a gargantuan amount of hot air alongside prodigious quantities of verbiage, but little actual substance as to what the plus points are to businesses considering dipping their toes in. Yes, promised simplified documentation and delayed tariff payments on goods are a given, and we know there will be various areas within the Ports offering a range of reliefs, but the meaning in actual hard currency has so far been shrouded in mystery for many.

Full details of the Freeport scheme in the UK can be seen on the relevant government web page which gives details, not only of the eight English sites currently permitted, but a breakdown of exactly what a Customs Freeport site operator can do within the confines of the Freeport, an area which can stretch to 45 kilometres beyond the port itself, and under what terms goods can be made, processed and transited through.

The UK has settled on a bespoke Freeport model incorporating secure Customs areas and operating as Special Economic Zones (SEZs). Although there are financial incentives for those who utilise them fully, they were in fact created by the government as breeding grounds for innovation and to promote job creation, and in some regions, regeneration. So in terms of what we know is on the table, as opposed to those vague government aspirations, what do we have?

There will be relief on stamp duty for certain land purchases. This will be on land within the Freeport that qualifies i.e. land situated in a designated Freeport site which is being purchased to be used in a ‘qualifying manner’. This is defined as land used and developed in a trade or profession. So it does not apply to residential dwellings, gardens etc. or property for residential rental. Nor does it apply to land being simply held for investment purposes.

Companies qualifying for the stamp duty relief only get it proportionately if they use between 10 and 90% of the land. Use over 90% of the land in the agreed fashion and full relief is claimable. The original transaction has to be done by 30 September 2026, the claim must be made within a fortnight of completion and the last date for claims is 14 October 2027.

Attractive for many businesses will be the offer of up to 100% discount on business rates for any operator on certain sites in a Freeport and this is available now. This will last for an initial 5 year period and must start before 30 September 2026. More good news for employers is that if operating in the Freeport tax zone they will not pay any NIC’s on new employees earning up to £25,000 per annum, this benefit to last three years. This benefit is due to kick in in April 2022 and the scheme is scheduled to last 9 years, although this will be reconsidered in 2026.

Another plus is the news that there will be enhanced capital allowances for both plant and machinery, and on buildings, with an unlimited 100% relief for plant and machinery in the first year for any firm paying corporation tax. There is also 10% (as opposed to the usual 3%) per year for spending on buying, constructing or renovating new structures in the approved areas and this applies to both income tax and corporation tax payers.

This article gives only a brief précis of what is available and, with the government regularly changing policies of late, the current situation should always be ascertained prior to assuming the facts remain as stated here. We are grateful to such as accountancy group BDO which runs an up to date breakdown of what is currently on offer on its Freeport Hub site.

Photo: An image illustrating an example of a Freeport centred around a seaport. Freeport customs sites meeting the criteria can be designated at any location within the wider Freeport boundary. Although part of an existing port may be designated as a Freeport customs site, it is not a requirement to do so. Both existing premises and greenfield/brownfield sites are eligible for designation.