In the March 21 Budget the location of eight freeports was confirmed; all are in England. The Scottish Government has unveiled plans to follow suit with a "new model for green ports" which adapts the UK model to "fit the Scottish context". It is expected that the freeports will become operational by the end of 2021 or early 2022.
Possible locations for the Scottish greenports include Rosyth, Orkney, Dundee and Aberdeen, and an applicant selection process is under development, with businesses recently being invited to submit notes of interest to the Scottish government.
Freeports are designated areas where normal tax and duty rules do not apply. They allow goods to be imported, manufactured and exported without being subject to the usual checks, paperwork and tariffs. Businesses operating in freeports generally benefit from lower tax rates.
Customs and tariff benefits
- Duty suspension - no tariffs, import VAT or excise duties are payable on goods brought into the freeport from overseas, until they leave the freeport and enter the domestic UK market
- Duty inversion - if the duty on a finished product is less than that on the component parts, a business could import components duty-free and manufacture the final product in the freeport, paying the duty at the rate applicable to the finished product when it enters the UK market
- Duty exemption for re-exports - this allows a business to import components duty free, manufacture the final product in the freeport, and then pay no tariffs on the components when the final product is re-exported
- Simplified customs procedures
Tax site benefits
To incentivise businesses to invest in capital, increase employment and improve productivity, the following tax benefits will be available to freeport sites:
- Capital allowances - an enhanced allowance of 100% for company investment in plant & machinery for use in freeport tax sites in Great Britain
- Structures & buildings - an enhanced 10% rate of structures & buildings allowance for constructing or renovating non-residential structures and buildings within freeport sites in Great Britain
- Stamp duty land tax - full relief from 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
- Business rates - full relief for all new businesses and certain existing businesses that have expanded
The Scottish context
The Scottish green ports are likely to offer broadly the same tax advantages as those available in the freeports already announced, but there will be some differences where the devolved taxes are concerned:
- Land & buildings transaction tax - the Scottish government proposes to offer a specific LBTT relief on relevant land transactions within qualifying tax sites in Scotland, though the details have yet to be confirmed
- Business rates - the Scottish government intends to offer up to 100% relief from non-domestic rates on certain properties within green port tax sites, from 1 April 2022; relief will be mandatory and will be administered by the relevant local authorities.
Our advisers can advise business owners who want to make the most of the opportunities presented by freeports; whether you are looking to relocate into a freeport, or you are trying to assess the impact on your business, we can help you make the right decisions. Contact us today.