Following the announcement in the March budget of the first eight Freeport sites in England, what will this mean for businesses looking to potentially move to a Freeport area?
The Government see Freeports as being a means of job creation and a boost to trade and investment. Goods can essentially be brought straight into a Freeport, without actually ‘arriving’ in the UK. Freeports will benefit from various measures, including tax breaks and customs simplified procedures, plus other incentives. The Government will introduce a bespoke Freeport model, aiming to achieve three objectives:
- Establish Freeports as national hubs for global trade and investment across the UK
- Promote regeneration and job creation
- Create hotbeds for innovation
Five sets of measures will combine in order to do this:
- Tax reliefs
- Regeneration funding
Within the Freeport itself, will be two sites, a primary customs site and a tax site. Each will benefit from the below listed reliefs.
- Duty deferral
- Import VAT suspension
- Customs simplified procedures
A Freeport must have a primary customs site, but can bid for subzones alongside the primary customs site.
- Capital Allowances
- Employment taxes, including National Insurance Contributions
- Business rates
- Buildings allowances
- Stamp Duty Land Tax
However, will there actually be increased investment, or just movement around the country, in a so called ‘levelling up’? Other perceived risks include:
- Economic displacement
- Illicit activity, money laundering, tax evasion, counterfeiting
It should be noted that a full record of all businesses operating within the site must be held by the Freeport and be available to HMRC and Border Force, so due diligence will have to be done by the Freeport operator, on the business located at the Freeport.
The challenge to Freeports could be where the benefits given are seen to be unfair subsidies, resulting in free trade inconsistency.
There is also a school of thought that Freeports will restrict exports to certain markets, where the UK has already signed post-Brexit continuity trade deals. It has been claimed that duty exemption prohibitions were not removed, that say businesses which have not paid import duty, cannot benefit from reduced tariffs on export. Examples of countries concerned include Singapore and Canada. The Government disputes these claims however, saying that exporters would not be shut out of key markets.
Unfortunately the detail on how Freeports will operate is still limited and so we will update this page in due course, when more is known. HMRC are currently in the process of developing the guidance and processes for how Freeports will work.
Scotland, Wales and Northern Ireland will develop their own Freeport policy and as yet, there is no detail on what this might look like.