The limelight was firmly shone on Freeports in the Chancellors Budget earlier this year, with his announcement of 8 new freeport sites in England, all to enter operation later in 2021.
Freeports have in fact been around in the UK for many years in the past; the first ones opened in the 1980s, but this announcement marks a revival and expansion of the concept, with the aim to promote regeneration and job creation in parts of the country that need it.
In this article we’ll unpack what a freeport is, and what the benefits are for small to medium sized businesses.
What is a freeport
There’s no exact definition of a freeport, but in simple terms it is an area within the country that is effectively outside the country’s customs borders.
What are the benefits of operating in a freeport?The main benefits centre around that fact that materials can be imported into a freeport with simplified customs procedures, and in most cases without tariffs. A business can then process them into a final product and then either pay a tariff on the goods sold into the UK, or export the goods without paying any UK tariffs at all.
The add-on benefit is that the government is promoting a package of tax incentives for businesses located in freeports.
What are the tax incentives on offer?There are various tax incentives in the package, including:
o Stamp Duty Land Tax (SDLT) relief
The government intends to offer SDLT relief on land purchases within Freeport tax sites
o Enhanced Structures and Buildings Allowance
Additional tax deductions for firms constructing or renovating structures and buildings within Freeport sites
o Enhances Capital Allowances
There will be additional tax relief for companies investing in new plant and machinery assets
o Employer National Insurance Contributions Relief
Employers operating in a Freeport site will be entitled to a 0% rate a proportion of employers NICs on salaries of new employees working in the site
o Business rates relief
The government will be offering 100% relief from business rates on certain business premises within Freeport sites.
What type of businesses will benefit from operating in a Freeport site?Clearly, operating inside a Freeport site will be a significant advantage to businesses who are involved in significant levels of import or export activity, and particularly those who import materials into the UK and then export the finished goods.
Where are the 8 new Freeport sites?The locations were announced by Chancellor in the Budget Statement in March:
- East Midlands Airport
- Felixstowe and Harwich
- Liverpool City Region
What are the next steps?All that’s happened so far is a bidding process which has resulted in an announcement of the selected sites.. Practical working out of the details will be happening throughout summer 2021, and more detail will be available as this is worked through.