HMRC publishes guidance tax relief in Freeport sites

In the spring budget earlier this year, it was announced there would be eight new Freeports in eight English regions. This was followed in the autumn budget, with secondary legislation to formally designate the first tax sites at the Humber, Teesside, and Thames Freeports.

HMRC has now published guidance on certain tax incentives available in Freeport tax sites, including the 100 per cent enhanced capital allowance for companies investing in plant and machinery, the new 10 per cent rate for the structures and buildings allowance (SBA) and stamp duty land tax (SDLT) Freeports relief. Guidance has also been published to help taxpayers check if goods can be moved into, or stored, in a Freeport customs site.

The enhanced capital allowance applies to new plant and machinery acquired by companies within the charge to corporation tax for use as part of a trading activity and primarily for use in a designated Freeport tax site. The enhanced capital allowance provides a 100 per cent deduction in the first year against profits from the qualifying activity.

The relief is available from the date a Freeport tax site is designated until 30 September 2026. However, the relief may be withdrawn where the plant and machinery cease to be for primary use in a Freeport tax site during its first five years of use.

New guidance has also been published to help taxpayers check if they can claim the new 1 per cent rate for the SBA on qualifying expenditure on structures and buildings in Freeport tax sites.

The 10 per cent relief is available to corporation and income taxpayers and is available where they begin construction of a building or structure, incur qualifying expenditure and bring the building or structure into qualifying use in a Freeport tax site on or before 30 September 2026.

An allowance statement must be prepared in order to claim the relief stating that the taxpayer wants the expenditure to be Freeport qualifying expenditure. Apportionment between the enhanced rate of SBA and the normal rate of SBA might be required where part of the building is outside of the Freeport tax site or where part of the building is brought into qualifying use after 30 September 2026.

HMRC’s SDLT manual has been updated with a new chapter on SDLT Freeports relief, which is available for certain acquisitions of land and buildings in designated Freeport tax sites, where the interest acquired is used in a “qualifying manner” and that acquisition is prior to 30 September 2026.

Very broadly a qualifying manner is for use in a trade or profession, to be held as an investment where the tenant will use the property in their trade or profession, or to be redeveloped for the purpose of being used in a trade or profession. Residential use is non-qualifying as is the acquisition of property for resale without any redevelopment.

Partial relief is available where the acquisition is a mixture of qualifying Freeport land and other property acquisitions, broadly where more than 10 per cent of the land is qualifying Freeport land.

In addition to the new guidance on Freeport tax reliefs, HMRC has also published guidance for taxpayers regarding when goods can be moved into, or stored in, a Freeport customs site.

• The guidance sets out that goods can be moved into, or stored in, a Freeport customs site if they are not excluded goods, and either:
• They are not controlled goods.
• They are controlled goods, but are being moved or stored under a different customs special procedure that the taxpayer is authorised to use, other than the Freeports customs special procedure.

The guidance then goes on to provide links and some examples of controlled and excluded goods.