Free Ports – What they are and how they can benefit your business?

According to Wikipedia Free Ports in the United Kingdom are a series of government assigned special economic zones where customs rules such as taxes do not apply until goods leave the specified zone. The theoretical purpose of such free ports is to encourage economic activity in the surrounding area and increase manufacturing.

As part of the 2021 United Kingdom budget, Chancellor of the Exchequer, Rishi Sunak announced that eight new free ports would be created. They are East Midlands Airport, Felixstowe and Harwich, Humber region, Liverpool City Region, Plymouth, Solent, Thames and Teesside.

The Thames Freeport is an economic zone connecting Ford’s world-class Dagenham engine plant to the global ports at London Gateway and Tilbury, to build on introducing the electric and autonomous vehicle technology along the A13 corridor into London.

With the Thames Freeport area so close, there may be potential tax benefits to your business:

1. Enhanced rate of structures and buildings allowance

An enhanced 10% rate of structures and buildings allowance for constructing or renovating non-residential structures and buildings will be available within Freeport tax sites in Great Britain. This means firms’ investments will be fully relieved after 10 years compared with the standard 33 1/3 years at the 3% rate available nationwide. This will be made available for Corporation Tax and Income Tax purposes. To qualify, the structure or building must be brought into use on or before 30 September 2026.

2. Capital allowances for plant and machinery

An enhanced capital allowance of 100% will be available for companies investing in plant and machinery for use in Freeport tax sites in Great Britain. This will apply to both main and special rate assets, allowing firms to reduce their taxable profits by the full cost of the qualifying investment in the year it is made, and will remain available until 30 September 2026.

3. Stamp Duty Land Tax (SDLT) relief

Full relief from SDLT will be available on the purchase of land or property within Freeport tax sites in England. Land or property must be purchased and used for a qualifying commercial purpose. The relief will be available until 30 September 2026.

4. Business rates relief

Full business rates relief will be available to qualifying businesses in Freeport tax sites in England. Relief will be available to all new businesses, and certain existing businesses where they expand, until 30 September 2026. Relief will apply for 5 years from the point at which each beneficiary first receives relief.

5. National Insurance contributions (NICs) relief

Subject to Parliamentary process and approval, the government also intends to make an employer NICs relief available for eligible employees in all Freeport tax sites from April 2022 or when a Freeport tax site is designated if after this date. This would be available until at least April 2026 with the intention to extend for up to a further 5 years to April 2031, subject to a review of the relief.

In Great Britain (England, Scotland and Wales), this measure will provide those employers with physical premises in a Freeport tax site (Freeport employers) with a zero rate of secondary Class 1 National Insurance contributions on the earnings of new employees who spend 60% or more of their working time within Freeport tax site. This rate can be applied on the earnings of all new hires up to £25,000 per annum from April 2022 for 36 months per employee.

To read more about the Government announcement on Freeports click here or to find out more about how this might affect and benefit your business please contact us.