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What are the benefits of Freeports?

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There are currently plans in place to implement eight new freeport sites in the UK, which should be up and running in the near future. Although, for businesses in the transport and logistic sector, what are the benefits? And how can they prepare to take advantage of the new freeports once open?

Back in March 2021, the Government announced plans to open eight successful freeport locations, with expectations to be operational by the end of the year. However, not all of the planned low-regulation, low-tax zones are open and running. One of the first to open was Teesside, which started operating on 19th November 2021. The Humber and Thames freeports have also been declared ‘tax sites’ and started operating in November. Freeport East, which includes Harwich International and the Port of Felixstowe, is due to start operating in the near future

Weighing up the positive and negatives

For businesses in the transport and logistics sector, it is important to weigh up the pros and cons of relocating to a freeport before committing. Before jumping right in, it is important to understand how the flow of goods operates in a specific freeport location, weighing up the positives and negatives of this could ultimately determine the best location to take advantage of. For example, Freeports East is home to the upcoming Freeport East Hydrogen hub, this site will lead a number of highly innovative hydrogen, nuclear, maritime and transport decarbonization schemes. On the other hand, Teesside requires a range of imported goods to cater for the diverse advanced manufacturers in the area, including those in sectors such as the on and offshore turbine manufacturing industry, which are on the rise.

Freight forwarders who are already working with customers in close proximity to one of the nominated freeport locations could benefit by setting up a facility within the ‘zone’. This would allow them to bring goods into the country, for manufacture or processing, and export them again, if required, without incurring significant customs duty liabilities and tax. However, there are additional costs to bear in mind. For example, many businesses have already had to invest significant resources to comply with rules of origin and new Border Operating Model requirements; hiring additional staff and implementing further training.

What should freight forwarders do?

With more freeports starting to become operational, freight forwarders need to take advantage of the time they have and make decisions on what they need to do. From 1st January 2022, taking advantage of the delayed declarations procedure for imports of non-controlled goods from the EU will no longer be possible. Businesses that have not yet submitted their supplementary declarations for any declared declarations made over the past year, have within 175 days of import to do so as well as needing to be prepared to make full frontier declarations. The start of 2022 also marks the end of the option to postpone the payment of import VAT, with quarterly VAT now being required to be filed at HMRC in the usual way.

Customs declarations

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Completing customs declarations in one of the new freeports is always going to be easier than doing them outside, and the Government has recently published guidance to help companies in making the necessary preparations. However, freight forwarders should also consider what other benefits locating in a freeport could bring them in the form of reliefs and enhanced capital allowances.. For example, businesses locating to one of the nominated ‘tax sites’ could qualify for Stamp Duty Land Tax Relief and Structure & Buildings Allowances Business Rates Relief.

Weighing up the benefits of locating within a freeport is not an easy or straightforward matter and businesses may need to seek professional advice to make the best choice. On the one hand, they might benefit from more allowances and tax relief, lower tariffs and reduced red tape. However, they will also need a strong customer base with links to the site to generate the sustainable revenues they need for the long term.

Join our Freeports webinar partnered with the Institute of Export for more insight into how you could utilise freeports

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Posted in Blog, Transport & logistics