The special tax and customs rules for free ports will help companies develop new facilities and operations to trade and manufacture goods more profitably, counteracting the effects of other complications such as Brexit and Covid-19. The early deliverability of opportunities for new businesses is essential; Solent Gateway Ltd at Marchwood Port, Southampton will lead the way with 64 hectares of new space which will begin to be available from fall 2022.
What is a free port?
A free port is an economic zone, generally encompassing a seaport or a freight airport, where the usual VAT and customs rules do not apply. This makes it cheaper and easier to import raw materials or components to manufacturers, turned into manufactured goods and then imported into the UK or exported. They may also have simpler planning rules, helping businesses build or adapt premises in the area quickly.
The locations of England’s eight new free ports were announced by the Budget Chancellor in March 2021:
East Midlands Airport
Felixstowe and Harwich
Liverpool City Area
The eight free ports will create some 170,000 jobs over the next five to ten years. Within the Solent Freeport, the Port of Marchwood operated by Solent Gateway Ltd has been designated as both a customs and tax site.
What are the tax incentives for free ports?
Within a free port customs site, there are two main advantages: first, customs duties and import VAT are only charged on goods if and when they are released from the free port to the UK. This allows businesses to process, store and transport goods with greater flexibility, giving them a cash advantage; second, the duties paid may relate to the final product rather than the components if they are lower, which also reduces the tax paid as raw materials normally have a higher rate of duty than manufactured or processed products. Free ports can help businesses improve processing time due to reduced transportation.
Freeport tax sites will benefit from larger capital deductions when purchasing plant and machinery or building new structures. Businesses will be able to claim 100% enhanced capital deductions on the purchase of new and unused plant and machinery incurred for trade conducted on the free port tax site. The purchase must be made before September 30, 2026 for the item to be eligible for this benefit. In addition, eligible expenditure for structures and buildings in a free port area will be eligible for the enhanced allocation for structures and buildings of 10% per annum for 10 years on expenditure incurred before September 30, 2026. It this is a significant increase from the current level of 3% per year. for 33 years for areas outside the free port. There are also some very attractive benefits around national insurance relief for up to 3 years per employee and corporate tariff relief, with new or expanding businesses requesting up to 100% relief. during 5 years.
Richard Parkinson, Port Manager at Solent Gateway Ltd, comments: “The UK Freeport Plan is a great initiative to get new companies to set up new freeport operations – it represents a golden opportunity for companies. British and foreign. Solent Gateway is unique in its offering as it is both a customs and tax site, with high quality logistics space that begins to be available for new businesses from fall 2022. In terms of who will benefit the most from operating in a customs and tax site such as ours are companies that wish to: develop new facilities and operations, thus benefiting from all the incentives to attract new companies; import goods and components into the UK; store the goods for as long as they want without having to pay customs duty after 90 days; and manufacture or assemble products, as import duties are paid on the final product or spare parts when they leave the free port, whichever is less expensive. If the goods are exported after manufacture inside a free port, no customs duty will be paid, so I have no doubt that free ports are very attractive to manufacturers.
He continues: “Any organization that wants to import, manufacture and export within a customs site will avoid all duties, so this is a great incentive. Any business that wants to store items for more than 90 days will also benefit. “
Solent Gateway is part of the Solent Freeport. The creation of the Solent Freeport will create 52,000 new skilled and semi-skilled jobs, including 26,000 direct jobs in the Solent and 26,000 across the UK supply chain. COVID-19 has widened the opportunities gap for these communities and a Solent Freeport provides a unique opportunity to reverse these trends.
The Solent Freeport will also support the upgrade across the UK, particularly in UK industrial centers in the Midlands and North. The potential for significant government investment in freight links between Southampton and the Midlands will be realized through the connectivity to global markets offered by the ports of the Solent.
Chris Anderson, Business Development Manager at Solent Gateway Ltd, comments: “Solent Gateway Ltd, located at Marchwood Port, Southampton, is one of the few sites in the UK that is both a tax and customs site. We are therefore tailor-made for the development of new import, manufacturing, assembly, storage, export or delivery facilities in the UK. The Port of Marchwood is a very high quality port logistics hub with exceptional maritime, rail and road connectivity, and will have 64.3 hectares of new space available for commercial use starting in the fall of 2022. ”