Budget 2021: Freeports

Rachael Tate

Rachael Tate

Tax Senior Manager

The UK Government announced in its Budget on 3 March 2021 that eight new Freeports are to be created in England. Usually located around shipping ports or airports, Freeports, sometimes known as free trade zones, are designated areas where businesses can benefit from more generous tax reliefs, simplified customs procedures and wider Government support.

The Freeport sites named in the 2021 Budget are forecast to become operational sometime in Q4 of 2021. The Government will introduce legislation to provide a series of targeted tax reliefs to tax sites, which are yet to be specified, in the created Freeport areas.

These tax reliefs will include an enhanced Structures and Buildings Allowances (SBAs) rate of 10%. The current UK wide 3% rate for SBAs sees investment expenditure in the construction or renovation of existing non-residential property relieved over 33 1/3 years. The enhanced 10% rate will allow 100% of qualifying incurred expenditure to be relieved in 10 years for both corporation and income taxpayers. The qualifying building or structure must be brought into non-residential use on or before the 30 September 2026.

Additionally, a 100% First Year Allowance on expenditure qualifying for main and special rate pool relief will apply in the designated Freeport tax sites in the UK. As with the enhanced SBA relief, the 100% FYA will be available until 30 September 2026.

Tax sites in Freeports located in England will also be 100% exempt from paying Stamp Duty Land Tax (SDLT) on property or land purchases. The purchase and use must be related to a commercial activity and will be available until 30 September 2026.

Discussions are currently underway with the devolved administrations in Scotland, Wales, and Northern Ireland to ensure Freeports are likewise established in these nations.

For more information on Freeports or to discuss the tax reliefs which may be available, please don’t hesitate to get in touch with our Construction & Property Incentives team.

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