Freeport tax sites present businesses with a unique opportunity to significantly reduce their costs and tax liabilities. In the second instalment of our Freeport Reports series, our tax experts explain the tax incentives that the East Midlands freeport has to offer and how your business can claim them.
The UK government first revealed its intentions to reintroduce the previously abandoned freeport system during its Spring Budget in 2021, with a plan to set up several freeports across the UK. Eight freeports have since opened in England, including the East Midlands freeport.
The government’s aim for the new freeports is to entice investment, promote job creation and encourage economic growth in regions that need it the most. Find out more information about what freeports are and how they work in our first Freeport Report.
A major benefit of the East Midlands freeport and other freeport zones is the significant tax incentives available to businesses located within its designated tax sites. In this article, we look at what tax reliefs are available and how you can use them to grow your business.
What is a freeport tax site?
UK freeports consist of up to three defined tax sites. If your business is located in the East Midlands freeport tax site, you can access a range of tax incentives to reduce your tax bill and allow you to fund further growth.
While the areas that a freeport tax site covers may overlap with a freeport customs site, they work and are authorised independently from each other.
What tax benefits are available at the East Midlands freeport?
There are four key types of tax reliefs available to eligible businesses located within a freeport tax site in England. These include employer National Insurance Contributions (NICs) when you take on new employees and enhanced capital allowances as you invest in your operations.
In freeport tax sites, relief on Stamp Duty Land Tax is available on land transactions and full business rates relief is also offered to new businesses that intend to move to a freeport tax site or enterprises that are looking to expand.
Stamp Duty Land Tax (SDLT) Relief
Certain transactions involving qualifying land and buildings in freeport tax sites in England could be eligible for substantial relief in SDLT.
Who can claim?
You can claim full relief from SDLT when buying land for your business if at least 90% of the purchase price is for qualifying land or buildings. A partial relief will be available if less than 90% of the purchase price is for qualifying land or buildings, provided it is more than 10% of the total price. The SDLT relief will be available from the date the designated tax site took effect until 30th September 2026.
Enhanced capital allowances
There are two types of capital allowance enhancements your business can claim on qualifying capital expenditure in a freeport tax site. These include:
Enhanced structures and buildings allowances (SBA)
You will be able to claim a 10% SBA for the acquisition, construction or renovation of structures and buildings for commercial purposes, as opposed to the usual rate of 3% per annum. This allows for a tax deduction equal to 10% of the total cost of an investment each year for a period of ten years.
Enhanced plant and machinery allowances
A 100% first-year allowance is available on capital expenditure on qualifying plant and machinery for use in a tax site.
Both benefits apply to expenditures incurred between the date the tax site was designated and 30th September 2026. Find out more about capital allowances and how to claim them.
Business rates reliefs
For newly formed businesses or companies that move to a freeport tax site, a business rates relief of up to 100% is available on your commercial property. If your business already operates within a tax site, a partial business rate relief is also available to help grow your business by acquiring new or additional sites or redeveloping your current premises.
The business rates relief is available until 30th September 2026, with the relief applying for five years from the point at which the business first receives relief.
When your business hires new employees, you will be entitled to zero-rated employers’ NICs for three years if the employees spend at least 60% of their working hours in the tax site (on earnings up to £25,000 per year per employee). However, their employment must start on or after 6th April 2022 but no later than 5th April 2026 to qualify.
These contributions can be significant for new or expanding businesses that relocate to a freeport location as their workforce expands.
Full details on the tax reliefs listed above and their specific requirements can be found on the Gov UK website.
Maximise your savings with specialist tax advice
The East Midlands freeport brings many tax incentives to local businesses, which will allow you to capitalise on savings and unlock cash flow. However, careful tax planning is essential to claim the relief you are entitled to.
Whether you are currently located in the East Midlands freeport area or are considering a move, our specialist tax advisory team has a wealth of experience in all areas of tax and can help you access the tax reliefs available to your business.