Guidance

Freeports business rates relief: local authority guidance

Updated 26 April 2024

Applies to England

About this guidance

1. This guidance is intended to support local authorities in administering the freeports business rates relief, originally announced in the Budget on 3 March 2021 and subsequently extended at the Autumn Statement on 30 November 2023. This guidance applies to England only.

2. This guidance sets out the criteria for the freeports business rates relief scheme. The guidance does not replace existing legislation.

3. Enquiries on this measure should be addressed to: NDR@levellingup.gov.uk

Introduction

4. At the Spring Budget on 3 March 2021, the government committed to creating 8 new freeports sites in England, where businesses would benefit from more generous tax reliefs, including business rates relief. The announcement confirmed that the following freeport sites in England were successful in their bidding process and the first freeports would begin operations from late 2021, subject to successfully completing the tax and customs designation processes and receiving approval on their business cases:

• East Midlands Airport, Felixstowe & Harwich, Humber, Liverpool City Region, Plymouth and South Devon, Solent, Teesside, and Thames.

5. At the Autumn Statement on 30 November 2023 the government announced that the window to claim Freeport tax relief would be extended from five to ten years, until 30 September 2031 for English Freeports.

6. Full business rates relief will be available to eligible business in these freeport tax sites in England, once designated. Relief will be available to all new businesses, and certain existing businesses where they expand, until 30 September 2031.

7. Relief will apply for five years from the point at which each beneficiary first receives relief. This means that if a business first received relief on 30 September 2026, the relief may be applied up to 29 September 2031. Where a business first receives relief on 30 September 2031, the relief may be applied up to 29 September 2036.

8. This document provides guidance to authorities about the eligibility criteria, operation, and delivery of the policy.

Freeports business rates relief

How will the relief be provided?

9. The government is not changing the legislation relating to the reliefs available to properties. Instead, the government will, in line with the eligibility criteria set out in this guidance, reimburse local authorities that use their discretionary relief powers under section 47 of the Local Government Finance Act 1988 (as amended), to grant relief.

10. It will be for individual local authorities, which administer the freeports business rates relief, to adopt a local relief scheme and determine in each individual case when, having regard to this guidance, to grant relief under section 47. The government will fully reimburse local authorities for the local share of the discretionary relief, using a grant under section 31 of the Local Government Act 2003.

11. Central government will reimburse billing authorities and major precepting authorities for the actual cost to them under the rates retention scheme of the relief that falls within the definitions in this guidance. Local authorities have to provide an estimate of their likely cost for providing the relief annually in their National Non-Domestic Rate 1 (NNDR1) return. Central government will provide payments to authorities to cover the local share. Local authorities will also be asked to provide outturn data on the actual total cost for providing the relief, via the National Non-Domestic Rate 3 (NNDR3) forms. Any required reconciliations will then be conducted at these points.

12. Central government will not meet any new burdens costs associated with the implementation of this relief scheme.

Eligibility principles - which properties will benefit from relief?

1. Principles for the application of relief to new business

a. Freeports business rates relief is available to new businesses moving into the freeport after the date on which the relevant freeport tax site has been formally designated (and on or before 30 September 2031) and occupying both existing and new hereditaments on the rating list.

b. Freeports business rates relief is available for 5 years from the date it is first claimed. Businesses will be able to claim the relief, where eligible, from the date on which the relevant freeport tax site has been formally designated and on or before 30 September 2031.

c. New businesses which expand after moving into the freeport (whether into new or existing buildings) will, in addition to any existing relief, be eligible for relief on any additional hereditaments they occupy in the relevant Freeport tax site.

d. In considering what is a new business, local authorities should lift the corporate veil and consider groups of companies to be single businesses.

e. Local authorities have discretion to apply additional tests for new business rate relief in order to avoid or not incentivise displacement of business activity from the surrounding area, or in order to further the objectives of the Freeport.

2. Principles for awarding freeports business rates relief for existing businesses

a. Subject to (c) to (g) below, full relief is available on a hereditament where a person has occupied the property comprising that hereditament for the first time on or after the date on which the relevant Freeport tax site is designated (and on or before 30 September 2031). This, for example, would include existing businesses expanding into a further property.

b. Subject to (c) to (g) below, partial relief is available on a hereditament where a person has occupied a room or similar within a hereditament for the first time on or after the date the relevant freeport tax site is designated (and on or before 30 September 2031). For example, where an existing business builds an extension or takes on new rooms or floors in their building leading to an expansion of the hereditament.

c. Ratepayers cannot generally claim freeports business rates relief merely by expanding their use of an existing room or similar within a hereditament. However, partial relief is available to a person in respect of part of a hereditament of which they were already the occupier or owner prior to the date on which the relevant freeport tax site is designated, provided that the space is within an existing room of a building and has become useable for the first time following development commenced on or after the date on which the relevant freeport tax site is designated (and on or before 30 September 2031) e.g. installation of a mezzanine or access/fire control improvements to bring an existing space into use.

d. Improvements to space already or previously in use by the person prior to the date on which the relevant Freeport tax site is designated, are not eligible for freeport relief (e.g. general refurbishment or improved services such as heating and aircon).

e. Local authorities may refuse to award freeports business rates relief where the increase in rates bills attributable to these factors is not reasonably ascertainable by the local authority.

f. Local authorities have discretion to apply additional tests for freeport rates relief in order to avoid or not incentivise displacement of business activity from the surrounding area, or in order to further the objectives of the Freeport. This may include reducing the award of relief in cases where a ratepayer’s occupation of a space arises in whole or in part from them vacating another space in the Freeport or surrounding area.

g. The freeports business rates relief is available for 5 years from the date it is first claimed. Businesses will be able to claim the relief, where eligible, from the date the relevant Freeport tax site has been formally designated (and on or before 30 September 2031).

3. Principles for establishing the value of the freeports business rates relief

a. Subject to (c) below, the value of full relief for hereditaments falling within 2(a) above is 100% of the bill.

b. Subject to (c) below, the value of partial relief should be 100% of that part of the rates bill attributable to the part of the hereditament falling within 2(b) and (c) above where that increase is reasonably ascertainable. In establishing the part of the rates bill attributable to the part of the hereditament falling within 2(b) and (c) above, authorities may have regard to:

i. the survey and rating valuation of the hereditament provided by the ratepayer if available (e.g., for hereditaments valued by area on the rental comparison basis).

ii. a change to the rateable value where it is clear that the change is solely due to the addition to the valuation of the parts of the hereditament falling within 2(b) and (c) above.

iii. any other information the authority deems appropriate to determine the extent of the parts of the hereditament falling within 2(b) and (c) above.

c. Local authorities may withhold or reduce the freeports business rates relief in cases of displacement (see 1(e) and 2(f) above)

Sequence of reliefs

13. The relief should be applied after mandatory reliefs and other discretionary reliefs have been applied, excluding those where local authorities have used their wider discretionary relief powers introduced by the Localism Act 2011.

14. Where a hereditament is in both an Enterprise Zone and a freeport area and would therefore be eligible for either relief, the local authority’s scheme should provide that the business must decide which relief is to apply to the hereditament. If for example a ratepayer was eligible for freeports business rates relief but was in receipt of EZ relief, the ratepayer would first have to notify the local authority of its decision to refuse EZ relief before freeports business rates relief could be applied. It would not be eligible for both reliefs. Of course, billing authorities may wish to use their discretionary powers to offer further discounts outside this scheme. However, where an authority applies a locally funded relief, this must be applied after the freeports relief scheme.

Subsidy control

15. Freeports business rates relief awards are likely to amount to subsidy. The government has created a subsidy scheme for the Freeports programme and local authorities should utilise this when making business rates relief awards in accordance with this guidance. The Freeports Subsidy Control Scheme was made on 19 November 2021, prior to the Subsidy Control Act 2022 coming into full force and effect from 4 January 2023, and it is therefore a legacy scheme and the subsidy control requirements set out in the Act do not apply except for the requirements as to transparency in Chapter 3 of Part 2 of the Subsidy Control Act 2022. Most of the UK’s domestic and international subsidy control obligations apply at scheme level (see the DBT guidance for public authorities which contains guidance and information on the UK subsidy control regime).

16. Under the Freeports programme subsidy scheme, any business rates relief awards made in accordance with this freeports business rates relief guidance are judged to be consistent with the subsidy control principles. This means that local authorities who satisfy themselves that an award complies with this guidance are not required to conduct their own assessment of the award against the subsidy control principles. It also means that a subsidy awarded under the scheme that complies with this guidance is insulated from legal challenge under the Subsidy Control Act. There is no cap to the value of a business rates relief award that can be made under the Freeports programme subsidy control scheme. For the avoidance of doubt, subsidies awarded under The Scheme do not constitute Minimum Financial Assistance and so do not cumulate with Minimum Financial Assistance awards.

17. Local authorities awarding freeports rates relief must put in place an appropriate mechanism to recover relief where it becomes necessary to do so. 

18. Local authorities must comply with the transparency requirements set out in Chapter 3 of Part 2 of the Subsidy Control Act 2022 and so will have an obligation to report some individual subsidies awarded under the scheme. Subsidies above £100,000, including those awarded under the Freeports programme subsidy scheme, are subject to transparency requirements. This is not cumulated per beneficiary but applies per subsidy award. This means that for every individual subsidy provided of more than £100,000, the local authority needs to include details of the subsidy on the subsidy control database and link that award to the Freeports programme subsidy scheme. Local authorities will need to create an account to use the Manage UK Subsidies Portal. This will enable users to upload subsidy schemes and awards. To gain access, users must email subsidydatabase@businessandtrade.gov.uk.