Policy paper

Statement on the designation of Freeport tax sites

Published 27 October 2021

The purpose of this statement is to provide an update to Freeports, and others with an interest in the Freeport tax site designation process, on the government’s process to assess information provided on tax sites and to designate specific Freeport tax sites.

On 29 October 2021, the government will lay the secondary legislation to designate the following Freeport tax sites:

• Teesside Freeport:
  • Teesworks East
  • Teesworks West
  • Wilton International
• Humber Freeport:
  • Hull East
  • AMEP
• Thames Freeport:
  • Dagenham
  • Tilbury
  • London Gateway

Those Freeports will therefore be able to begin initial operations from November once the legislation has passed. The Freeports will encourage businesses from around the world to create new hubs of global trade that will transform economic prospects and job opportunities for local communities.

Tax reliefs

After designation businesses in these Freeport tax sites will be able to benefit from a number of tax reliefs.

If needed, the government may at an appropriate point introduce further guidance for businesses claiming Freeport tax reliefs, to reflect the outcome of ongoing discussions between the UK and the EU about the Northern Ireland Protocol.

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.

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.

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.

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.

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.

Timing

The enhanced structures and buildings allowance, enhanced capital allowance and relief on SDLT come into force through the designation of Freeport tax sites by Statutory Instruments, pursuant to the powers in the Finance Act 2021. The business rates relief will come into force through guidance from the Department for Levelling Up, Housing and Communities to local authorities. The employer NICs relief will come into force once legislated by Parliament in due course.

Assessment of criteria

As noted in the bidding prospectus, in order to be designated, Freeport tax sites need to satisfy certain criteria. This has been and will continue to be assessed as part of a full tax site assessment process run by HM Treasury.

Tax sites can only be approved if they are sufficiently underdeveloped. This is set out in paragraph 3.1.25 of the bidding prospectus and Q51 of the Freeports Clarification Q&A.

A site that currently has a level of utilisation and jobs is eligible to be designated as a tax site where evidence shows that it will become underdeveloped, as defined in the bidding prospectus, within a reasonably short period of time.

Decisions around individual Freeport tax sites have been and will be made as part of the full tax site assessment process.