In a measure aimed at further developing the UK’s new international trading arrangements, the Budget set out the location of eight new Freeports. These are sites where organisations can be based to undertake their activities while benefitting from certain fiscal reliefs. For example, it was announced in this Budget that Freeports would allow for greater capital and buildings allowances – read more on this in Eight Freeports announced to help build future international trade.
There has been no detail released on the tax benefits of these zones, other than from 9 March 2021 they will be designated as Freeport Tax Sites. Although there have so far been no announcements as to the VAT and customs duty reliefs that will be apply, the likely tax benefits will be that Freeports are treated in much the same way as a customs warehouse. This means that although located in the UK, they are outside of the VAT and customs area. As a result, goods can be moved in and out of the Freeports, to and from locations around the world, free of any import obligations (i.e. import VAT, duties and associated paperwork). We expect that items sold while within a Freeport would also be free of VAT.
We have previously provided content about the potential benefits of Free Trade Zones, and will continue to monitor developments on this and update our guidance as that happens. There are a number of tax technical and practical hurdles that will need to be worked through in order for Free Trade Zones to be implemented and truly beneficial for UK businesses.
In the meantime, take a look at our previous comments on Free Trade Zones, The introduction of Freeports post Brexit and Free Trade Zones: a potential opportunity for the UK.
