« Back to Our Blog

Freeports now open in the UK

As part of the UK government’s agenda to increase investments in deprived communities, the first 11 designated tax sites
from a list of eight planned freeports are up and running. This includes sites alongside the Thames, Tees, and Humber rivers and estuaries, plus several in East Suffolk.

Like enterprise zones, the purpose of freeports is to increase opportunities for employment and economic development in previously underdeveloped areas, which will also boost the overall UK economy. Let’s take a look at the advantages of freeport designated tax sites and where they’ll be.

What is a freeport or designated tax site?

A UK freeport is a geographical zone where normal customs and tax laws do not apply. These areas are usually located close to a sea port or airport, and up to 45 kilometres in diameter. There were previously six freeports in the UK from 1984 to 2012, and now there will be eight in England alone.

The working theory is that goods entering the freeport zone from abroad, or even manufactured and exported overseas from within the zone, will be exempt from the regular tariffs. Businesses will only have to go through the full customs tax process if the goods leave the zone and enter the UK.

However, exemptions won’t necessarily apply to every part of the freeport area; that’s where designated sites come in. For example, there may be separate designated tax sites and designated customs sites – smaller areas within the freeport zone where specific exemptions will apply.

Where are the new UK freeports?

The government in England is currently working with the other nations in the UK to establish British freeports, but Scotland, Wales, and Northern Ireland may develop slightly different freeport policies. The following eight regions in England were successful in the freeport bidding process:

  • East Midlands Airport
  • Felixstowe & Harwich
  • Humberside
  • Liverpool City Region
  • Plymouth & South Devon
  • Solent
  • Teesside
  • Thames

Of these eight freeport regions, four are currently in action, each with three designated tax sites (apart from Humberside, where the third proposed site is yet to be officially designated). Most of the freeport designated sites came into effect on 19th November 2021, with the East Suffolk freeport following from 30th December 2021.

There is currently also a Teesside customs site and a Thames customs site in operation. These are by no means the only designated sites within these four areas, as more are likely to be added along with sites within the remaining four freeport zones – so keep an eye on the government website.

What are the tax benefits of freeports?

Companies operating within freeport designated sites in England will be eligible for temporary tax exemptions and reliefs, which is the main draw for many businesses. These tax incentives include:

  • Enhanced capital allowances

In the first year of investing in plant or machinery for use within the freeport zone, companies could receive a 100% deduction or 130% ‘super-deduction’ on qualifying assets (both main and special).

  • Increased structures and buildings allowance

Qualifying buildings and structures within freeport sites
will receive an increased 10% allowance for both Corporation Tax and Income Tax, relieving investments 3 times faster than the national rate.

  • Full Stamp Duty Land Tax relief

Purchases of land or property within a freeport for commercial purposes may qualify for full stamp duty land tax (SDLT)
relief. This means some developments won’t have to pay the 2% or 5% rates.

  • Full business rates relief

All new businesses and some expanding businesses in freeport designated sites may qualify for a 100% exemption from business tax rates, applicable for 5 years from an accepted application.

  • National Insurance Contributions (NICs) relief

From April 2022, new hires working in a freeport designated site at least 60% of the time could be eligible for an employer NICs rate of 0% on earnings up to £25,000 a year, applicable for 36 months.

These tax benefits will only be available until 30th September 2026. The NICs relief is still subject to Parliamentary approval, but there are also plans to extend it for a further 5 years until April 2031.

In addition, there are customs benefits for businesses operating within freeport designated customs sites. These include a simplified import process, with no customs tariffs due unless the imported goods enter the UK domestic market. Imports that are processed into finished goods within the freeport and then re-exported will also avoid UK tariffs (this is subject to UK trade agreements, meaning that customs and taxes may still be payable upon reaching the destination country).

When are more UK freeports opening?

Since the government intends to operate at least three designated tax sites and perhaps also three designated customs sites in each of the eight freeports in England, we can expect regular updates on new designations and operative dates via the government website as we progress into 2022.

The government also intends to open at least one freeport
each in Wales, Scotland, and Northern Ireland. Considering the ongoing discussions with the EU regarding the Northern Ireland Protocol, there is likely to be separate guidance for customs procedures and tax reliefs over the Irish border.

If your business is within a planned freeport region, and you require tax advice or any other type of accounting assistance, please contact GBAC. Our experienced accountants in Barnsley are just a phone call away on 01226 298 298, or you can email us at info@gbac.co.uk and we’ll be in touch.