Guidance

Freeports business rates relief: local authority guidance

Published 21 July 2021

Applies to England

About this guidance

1. This guidance is intended to support local authorities in administering the freeports business rates relief, announced in the Budget on 3 March 2021. 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@communities.gov.uk

Introduction

4. At the 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. 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 2026.

6. 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.

7. 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?

8. 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.

9. It will be for individual local authorities, which administer the freeports business rates relief, to adopt a local 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.

10. 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. For 2021/22, authorities will be reimbursed following the submission of outturn data in the National Non-Domestic Rates 3 (NNDR3) form for 2021/22.

11. Because the announcement of freeports sites was made after the NNDR1 for 2021/22 had been submitted, relevant billing authorities will be asked to provide a separate estimate of the likely total cost of providing the relief in 2021/22. In addition, billing authorities should ensure that they are able to monitor and report the take up of the scheme at Parliamentary constituency level.

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 2026), 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 2026).

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.

2. Principles for awarding freeport 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 2026). 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 2026). 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 freeport 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 on 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 2026). 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 Freeport 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 within the freeport of the surrounding area. 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 Ffreeport 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 2026).

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 Rates Relief in cases of displacement (see 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 Freeport 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 Freeport 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. As outlined in the bidding prospectus, the freeports business rates relief is subject to the UK’s domestic and international subsidy control obligations. Businesses located in designated tax sites will need to fulfil any requirements in place to ensure compliance with those obligations in advance of, during, and after claiming relief. See the BEIS guidance for public authorities which explains the subsidies chapter of the TCA, World Trade Organisation rules on subsidies, and other international subsidy control commitments.