Check if you can claim the enhanced capital allowance relief in UK Freeport or Investment Zone special tax sites
Find out if you can claim the enhanced capital allowance relief on qualifying expenditure for plant and machinery in a UK Freeport or Investment Zone special tax site.
Where we refer to a ‘Freeport’ on this page, this also applies to ‘Green Freeports in Scotland’ unless otherwise stated.
A special tax site is an area of land where businesses can claim certain tax reliefs. Special tax sites are sometimes known as Freeport tax sites or Investment Zone tax sites. A Freeport tax site is independent and separately authorised from Freeport customs sites, but they can cover the same area of land.
You can claim the enhanced capital allowance relief where you buy plant or machinery for use in a special tax site.
The relief can be claimed for expenditure incurred from the date a special tax site is designated until the special tax site’s end date.
You cannot claim until the relevant Freeport or Investment Zone special tax site has been designated.
Check which sites are designated:
You can find more information on categories of expenditure representing plant and machinery. Read section ‘What you can claim on’ in the capital allowance guidance.
Find out more about Freeports.
Find out more about Investment Zones.
How to qualify
You can claim the relief for qualifying expenditure for plant or machinery that meets the following conditions:
- the plant or machinery must be for use primarily in a designated special tax site at the time the expenditure is incurred
- the plant or machinery must be unused and not second-hand
- the plant or machinery must be for use as part of your trading activity, or an activity arising from land where the profits or losses are treated for tax purposes as arising from a trading activity
- you must be registered for Corporation Tax
How much relief you can claim
You can claim 100% of the qualifying expenditure against the profits from your qualifying activity for the accounting period in which it takes place.
You can only claim 100% of the qualifying expenditure which is attributable to the part of the plant or machinery which is for use in a special tax site where both the following apply:
- qualifying plant or machinery is also for use outside of a special tax site
- the main purpose for incurring the expenditure is to get the enhanced capital allowance for that part which is for use outside of a special tax site
How to claim the relief
You must claim on your tax return.
Withdrawal of relief
The primary use of the plant or machinery must continue to be for a special tax site for 5 years from when the plant or machinery is first:
- used in a special tax site as part of your trading activity, or your activity arising from land where the profits or losses are treated for tax purposes as arising from a trading activity
- kept for use for your trading activity in a special tax site, or for your activity arising from land where the profits or losses are treated for tax purposes as arising from a trading activity
The relief that you have claimed should be withdrawn if the plant or machinery ceases to be for primary use in a special tax site during the 5 year period.
You must notify us within 3 months of the plant and machinery ceasing to be for primary use in a special tax site.
Examples
Example 1
You purchased new plant and machinery costing £300,000 in March 2024 which was installed as integral features within your new warehouse, the construction of which was completed on 22 March 2024. The warehouse was situated in a special tax site at the time the plant and machinery were purchased.
You prepare accounts for each year ending on 31 March.
In the chargeable period to 31 March 2024, you can claim the enhanced capital allowance for the entire cost of this plant and machinery, being £300,000.
Example 2
You purchased 10 new forklift trucks costing £400,000 in August 2023 to use in your manufacturing business.
You have a factory situated outside of a special tax site, which you have been using in your business for many years. You have set up another larger factory, which is situated in a special tax site, and which you have started to use in your business on 1 August 2023. You expect to produce twice as many goods from this new factory as from the other factory.
The forklift trucks have been purchased for moving goods around the factory sites. Three of them replace 6-year-old forklift trucks which were used exclusively in the older factory, located outside of the special tax site. You could have designated the 3 replacement forklift trucks for sole use in that older factory but instead you decide that all 10 trucks should be designated for mixed use and moved between sites on demand, as you believe that this might enable you to obtain the enhanced capital allowance for all 10 trucks.
You prepare accounts for each year ending on 31 July.
The primary use of the forklift trucks will be within a special tax site, but at the time of purchase, the forklift trucks are also intended to be partly used in an area that is not a special tax site and the main purpose, or one of the main purposes of your designating the trucks for mixed use was to obtain a first-year allowance in relation to the expenditure attributable to the use outside of the special tax site.
You will need to apportion the cost of the forklift trucks on a just and reasonable basis to arrive at the enhanced capital allowance which is available.
From the information in this example, the apportionment of the expenditure qualifying for the enhanced capital allowance available for the chargeable period to 31 July 2023 could be calculated as follows.
Although these forklift trucks are expected to be used in both factories, 3 of these were purchased to replace the existing aging equipment which was used exclusively outside of the special tax site.
Consequently, an apportionment will be needed to include only that part of the expenditure attributable to the intended use in the special tax site.
The apportionment would need to be made on a just and reasonable basis, which could be estimated in this example from the quantity of goods produced from each factory.
As the new factory is expected to produce twice as many manufactured goods as the older factory, the apportionment could be estimated using a ratio of 2:1.
Apportionment of the expenditure attributable to the new factory and eligible for enhanced capital allowances will be £400,000 × 2/3 = £266,667.
Enhanced capital allowance available = £266,667.
For that part of the expenditure which does not qualify for the enhanced capital allowance (£133,333), relief will be available through other capital allowances.
Last updated 8 April 2024 + show all updates
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Information about Investment Zones has been added.
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Welsh translation added.
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First published.