One of the less well publicised parts of the Government’s post-Brexit strategy is the creation of freeports across the UK. So what are they and will they help businesses?
Now that the UK has left the European Union, the Government wants to establish numerous freeports as a tool to encourage trade while increasing jobs and investment opportunities. As well as tax reliefs, the freeports will benefit from swifter procedures for importing and exporting goods.
“Any initiative aimed at promoting business and investment should be welcomed,” says Joanne Colman from One Click Accountant.
“The benefits of freeports should be felt in across the UK, as new businesses move in creating employment opportunities”Joanne Colman, One Click Accountant
“This is a bold strategy by the Government, but we are confident that companies will embrace the challenge,” Joanne continues.
To see if your business can capitalise on freeports, Joanne has come up with the top three things you should know…
1. What are freeports?
“The principle of a freeport is to be a secure customs zone where businesses can operate inside a country, but under different trading rules,” explains Joanne.
“There are freeports across the world which offer a range of customs and taxation benefits in order to make business easier and quicker.”
The UK Government has chosen its own freeport design, setting out three objectives, to:
- Establish freeports as national hubs for global trade and investment across the UK
- Promote regeneration and job creation
- Create hotbeds for innovation.
To meet the objectives, the Government has proposed five measures:
- Tax reliefs
- Regeneration funding
2. Where will freeports be located?
The UK Government said that it intended to establish 10 freeports. The following have been approved, but there could be many more:
- East Midlands Airport
- Felixstowe and Harwich
- Humber region
- Liverpool City Region
Freeports can also be airports. While East Midlands Airport was approved, Bournemouth International is waiting for a decision.
It is hoped that the first ones could be open for business later in 2021.
3. What are the benefits?
“The UK model requires a main customs site at a port or airport, plus additional sub-zones which can also benefit from the freeports customs system,” continues Joanne.
“Businesses within freeports will receive tariff benefits, such as duty deferral for goods on site and duty exemption when goods are imported, processed and exported. Importation systems will be simpler and businesses will be able to suspend import VAT.”
The proposals state that businesses based within freeports will be able to claim reliefs from business taxes, including:
- Stamp Duty Land Tax (SDLT) Relief: for land purchases.
- Enhanced Structures and Buildings Allowance (SBA): an enhanced SBA rate for firms constructing or renovating structures.
- Enhanced Capital Allowances (ECA): tax relief for companies investing in qualifying new plant and machinery.
- Employer National Insurance Contributions (NICs): employers in freeports pay 0% employer NICs on the salaries of new employees earnings up to £25,000 per annum.
- Business Rates Relief: incentives of up to 100% relief will be available on certain business premises within freeports.
Please note there are limits and conditions on all of these tax benefits.
“Supply chains have already been affected by Brexit, and freeports are another thing to consider for those involved in shipping and logistics,” adds Joanne.
“The good news is that, subject to the finalised customs arrangements, freeports could become a positive addition to those trading with the EU and the rest of the world,” Joanne concludes.
If you feel freeports might benefit your business, you will need to consider the tax implications, including customs duty, VAT and employment taxes.
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