Promised in the Conservative Party 2019 manifesto, Rishi Sunak's Freeport announcement in the Spring Budget has been hailed as good news for those regions that put in the most 'ambitious and exciting bids'.
The areas announced are East Midlands Airport, Felixstowe and Harwich, the Humber region, the Liverpool City Region, Plymouth, Solent, Thames and Teesside are all set to benefit with promises of job creation and regeneration.
Mr Sunak said the “special economic zones with different rules to make it easier and cheaper to do business” would come with simpler planning, cheaper customs – with favourable tariffs, VAT or duties – and lower taxes, with “tax breaks to encourage construction, private investment and job creation”.
The 海角视频 had Freeports before - from 1984 to 2012, there were seven in the country at various stages but legislation allowing them was allowed to lapse.
Further announcements are still expected on freeports within the devolved administration, with a total of at least 10 freeports expected in the 海角视频.
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The benefits of Freeports
Victoria Alford, tax consultant PKF Francis Clark, explained what the main benefits will be for those businesses operating in the Freeport zones.
She said: “Freeports are similar to enterprise zones and will be designated geographical areas, recognised in law, where businesses can benefit from more generous tax reliefs, customs benefits, simpler planning and wider government support. Freeports are usually located around shipping ports and airports. In these zones the normal tax or tariff rules of the country do not apply.
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The freeport tax reliefs announced in the Budget are largely expected to last for a period of five years.
They include:
- An enhanced 10% rate of structures and buildings allowance for constructing or renovating non-residential structures and buildings within freeport tax sites in Great Britain. This means investments will be fully relieved after 10 years compared with 33 years for properties in other locations which only achieve a 3% rate.
- An enhanced capital allowance of 100% for company investment in plant and machinery for use in freeport tax sites in Great Britain.
- Full relief from stamp duty land tax (SDLT) on the purchase of land or property within freeport tax sites in England where it is purchased and used for a qualifying commercial purpose.
- Full business rates relief available to all new business and certain existing businesses that have expanded.
The government also intends to introduce a further tax relief in the form of employer national insurance contributions (NIC) relief for eligible employees in all freeport tax sites, but this is subject to parliamentary approval, said Ms Alford.
Chief Secretary to the Treasury Stephen Barclay, quizzed about freeports by MPs last month, said he had expected the first freeports to be “ideally … operational by the end of the year”.
The freeport model works by allowing companies to import goods tariff-free and only paying once it is sold into the domestic market, or exporting the final goods without paying 海角视频 tariffs.
The downsides
But Tim Morris, chief executive of the 海角视频 Major Ports Group, warned: “Freeports alone are not a silver bullet for addressing deprivation in coastal communities.
“The Government should look at extending some of the low-cost, pro-investment measures in the freeports ‘tool box’ to port areas more widely.”
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Michael Harris, Financial Crime Consultant at global data and analytics provider LexisNexis® Risk Solutions , warned that while Freeports will provide a welcome boost to local economies, there is a risk of bringing criminal activity via the 'back door'.
He said: "In recent years, there has been numerous examples of vulnerabilities in free trade zones, with trade in high valuable goods being funded by illicit money. It is imperative that lessons are learned from this to ensure that firms taking advantage of the tax breaks and other benefits are held to account. Authorities granting access to firms, need to take a risk-based approach and conduct adequate levels of checks and due diligence on both the company, its beneficial owner and key executives to ensure there are no known financial crime or reputational risks."
published in 2019 and looking at enterprise zones and land-based incentive areas like Freeports, concluded that they are unlikely to provide high skill jobs, instead creating low wage jobs in warehousing and could well drain activity from elsewhere in the country rather than creating new activity.
The report said: " These findings should lead to greater caution over the creation of enterprise zones or any other area-based initiative, such as the free ports that have been suggested after the 海角视频 leaves the EU.
"Zones offering tax incentives or tariff reductions to relocate are likely to move activity around the locality or in from elsewhere in the
country, rather than create a new activity. And they are unlikely to attract in higher-skilled jobs that would change the fortunes of an economy."
Reaction to the new Freeports in England
Will Freeports help the regions 'level-up'? Will it drain other areas of enterprise as businesses take advantage of freeport status? Let us know your thoughts in the comments section below