A golden opportunity for trade and manufacturing
The government has selected eight new freeports in England as a means to boost trade, jobs and investment across the country. The special taxation and customs rules for the freeports will help businesses develop new facilities and operations to trade and manufacture goods more cost-effectively.
Solent Gateway Ltd at Marchwood Port, Southampton will be leading the way with 64 hectares of new space starting to come available from as early as Autumn 2022.
What is a Freeport?
A freeport is an economic zone, typically encompassing a freight seaport or airport, where typical VAT and customs rules don’t apply.
This makes it cheaper and easier for raw materials or components to be imported to manufacturers, processed into manufactured goods and then imported into the UK or exported.
They can also have simpler planning rules, helping businesses to quickly build or adapt premises in the area.
Where are the Freeports?
The locations of England’s eight new freeports were announced by the Chancellor at the Budget in March 2021:
– East Midlands Airport
– Felixstowe and Harwich
– Humber region
– Liverpool City Region
The eight freeports will create some 170,000 jobs in the coming five to ten years. Within the Solent Freeport, Solent Gateway Ltd has been designated as both a customs site and tax site.
How will the new Freeport help the local area?
Establishing the Solent Freeport will create 52,000 new skilled and semi-skilled jobs, including 26,000 direct jobs in the Solent and 26,000 in the wider UK supply chain.
What are the benefits of using a Freeport?
Within a freeport customs site, there are two principal benefits:
Firstly, Customs Duty and Import VAT are only charged on goods if and when they are released from the freeport into the UK. This enables businesses to process, store and transport goods with greater flexibility.
Secondly, duty paid can be on the final product rather than component parts if lower, also reducing the tax paid as raw materials normally have a higher duty rate than the manufactured or processed goods.
Freeports can help businesses to improve processing time due to reduced transportation.
Freeport tax sites will benefit from greater capital allowances when purchasing plant and machinery or building new structures.
Companies will be able to claim 100% enhanced capital allowances on the purchase of new and unused plant and machinery that is incurred for a trade being carried out at the freeport tax site.
Plus, qualifying expenditure on structures and buildings within a freeport zone will qualify for Enhanced Structures and Buildings Allowance at 10% per year for 10 years on expenditure incurred before 30 September 2026.
This is a significant increase on the current level of 3% per year for 33 years for non-freeport areas.
There are also very appealing benefits around national insurance relief for up to three years per employee and business rates relief, with new or expanding businesses being able to claim up to 100% relief for five years.
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