Freeports FAQs

Background FAQS on freeports can be found below

Why is the UK introducing freeports? 

Added 27/01/2022

Aimed at creating economic activity near ports or airports, with tax and customs incentives, such as the introduction of a flexible new customs code, aimed at improving on existing customs arrangements, where the import of goods will be tariff free for re-export, plus reduced rates for capital allowances, National Insurance Contributions and business rate reliefs.

Where are the freeports?

Added 27/01/2022

Eight sites have been proposed: Teesside, Thames, Felixstowe and Harwich, Solent, East Midlands airport, Liverpool, Plymouth and Humber.  A further two have now been proposed for Scotland.

Where are we now, what freeports are open and when are others likely to come on stream? 

Added 27/01/2022

Teesside and Thames are open for business, with Felixstowe and Harwich expected to follow soon.  It is not clear when others will become operational as discussions with government are still taking place.

Hasn’t the UK had freeports before and why will this be different? 

Added 27/01/2022

The UK has previously had freeports, that opened during the 1980s, but no licence renewals were made from 2012.  In theory, the UK would now have more freedom in what it can offer, now that it has left the EU. 

What about NI, Scotland and Wales Freeport policy? 

Added 27/01/2022

It has now been announced that there are plans for two ‘green freeport’ sites in Scotland, set for 2023 and the bidding process has now opened.

What businesses are eligible and are certain industry sectors more suited, for example, certain Freeports major on certain industries, such as automotive, wind energy, pharmaceuticals? 

Added 27/01/2022

Freeports will be suited to particular types of business, mainly manufacturers and processers and each freeport usually has a particular industry sector in the local area, connected with it, for example on and offshore wind energy at Teesside, automotive at Thames and energy at Felixstowe and Harwich.

The various Freeports push innovation and the green agenda, especially net zero carbon emissions, so how important is this, if applying? 

Added 27/01/2022

This is an important factor and the proposed sites in Scotland will be named green freeports, so if businesses can demonstrate net zero aspirations and innovation when looking to apply, this would be an advantage.  As an example, the Felixstowe and Harwich freeport is leading on a green hydrogen hub, to be one of the world’s most innovative transport decarbonising schemes.  

Customs and Tax zones

How are freeports structured?

Added 08/03/2022

Freeports are geographically distinct areas which, within the boundary area of up to 45km from the port, contain special customs sites and tax sites.  These sites are areas that have been designated and recognised in law as geographical areas where businesses can benefit from customs and tax reliefs. For instance, within each freeport there can be up to 3 tax sites with a combined total of no more than 600 hectares. Maps of the designated areas of the customs sites and tax sites for each freeport can be found here:

What customs procedures can firms make use of? how do they work?

Added 01/03/2022

The customs single authorisation will encompass certain customs procedures, including temporary admission, inward processing and customs warehousing, under the one authorisation, however, where individual authorisations are already held, these can continue to be used.

What are the customs duty and VAT advantages? 

Added 01/03/2022

Goods can be imported to a freeport, tariff free, followed by re-export and the customs single authorisation will aim to streamline customs procedures.  A freeport will benefit from the various available customs reliefs, including temporary admission, inward processing, duty deferment, duty inversion and customs warehousing.

What can you do in a Freeport, that you can’t do outside, with regards to customs duty and VAT administration and reliefs? 

Added 01/03/2022

In theory, with the correct authorisations, everything that can be done in a freeport, with respect to customs duty and VAT, can be done outside a freeport and so the benefits of a freeport must be assessed by looking at the freeport as a whole and the associated other benefits they bring, not just the customs duty and VAT benefits.  There is of course the advantage of being able to use a single authorisation in a freeport, plus the intention is to streamline customs procedures and allow access to trade corridors.

I have heard that the conditions to be met are benchmarked against the AEO(S) conditions, so does a business need AEO to move into a Freeport? 

Added 01/03/2022

This is not yet known, but published HMRC guidance sets out the requirements for documentation and safety and security, which are similar to the AEO conditions.

What is the Free zone exit charge and is it definitely being implemented? 

Added 01/03/2022

This is aimed at zero rating supplies of goods and related services made in a freeport, providing a cash flow advantage to businesses operating in a freeport.  Where goods leave a freeport and there is no qualifying onward supply, VAT will be due.  This is aimed at preventing businesses attempting to locate in a freeport, purely to avoid irrecoverable VAT.

How does duty inversion work? 

Added 01/03/2022

Duty inversion is where the duty paid on imported goods is higher than the manufactured finished product that is eventually re-exported, however, the duty paid, will only be the lower amount.

What are the direct tax advantages from being in a Tax zone?

Added 08/03/2022

Not only are there potential savings linked to streamlined customs procedures and tariff-free imports, there are also additional benefits if the business is located in a tax site of a freeport. For example, the business could benefit from up to 100% relief from business rates on certain premises as well as reduced national insurance Contributions (NICs) liabilities. There are also SDLT exemptions and enhanced Structural Buildings Allowances of 10% available when acquiring qualifying land and property, as well as enhanced capital allowances of 100% when investing in qualifying new plant and machinery.

What do we know about the likely timelines to operate in a freeport? 

Added 08/03/2022

This will depend on the individual freeport and what stage it is at.  Businesses that are interested in setting up in a freeport should contact the operator of the freeport to discuss eligibility and the relevant application process. Businesses that want to move goods into or out of a freeport customs site will need to apply to HMRC to use the freeport customs special procedure.

For more information around freeports and customs please contact Sean Turner, for information around the tax benefits of freeports please contact Nick Farmer below:

Posted in Blog, Transport & logistics