Extension to when tax and National Insurance contributions reliefs are available in Freeport and Investment Zone special tax sites
Published 30 April 2024
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This publication is available at https://www.gov.uk/government/publications/extension-to-freeport-and-investment-zones-special-tax-site-sunset-dates/extension-to-when-tax-and-national-insurance-contributions-reliefs-are-available-in-freeport-and-investment-zone-special-tax-sites
Who is likely to be affected
Businesses investing and hiring new employees in or connected with Freeport or Investment Zone special tax sites.
General description of the measure
This measure extends the window to claim the tax reliefs available in Freeport and Investment Zone special tax sites from 5 to 10 years. The new sunset dates for the reliefs are:
- 30 September 2031 for all special tax sites in respect of English Freeports
- 30 September 2034 for all special tax sites in respect of Scottish Green Freeports and Welsh Freeports
- 30 September 2034 for all special tax sites in respect of Investment Zones
The tax reliefs available in special tax sites are:
- enhanced structures and buildings allowances (eSBA)
- enhanced capital allowances (ECA) for plant and machinery
- secondary Class 1 National Insurance contributions relief for eligible employers on the earnings of eligible new employees up to £25,000 per annum for up to 3 years
- Stamp Duty Land Tax (SDLT) relief, in respect of special tax sites in England
Policy objective
Extending the duration of the tax reliefs available in Freeport and Investment Zone special tax sites from 5 to 10 years will:
- deliver benefits to businesses to stimulate investment
- provide greater certainty to investors to maximise the programme’s impact
Background to the measure
Freeports were announced in March 2021 with the aim to rebalance regional economies in disadvantaged parts of the UK by promoting regeneration and job creation, laying the foundation for establishing long-term key economic assets.
At Autumn Statement 2022, the government announced a refocused Investment Zones programme as a critical part of:
- boosting the UK’s potential as an innovation nation
- growing strengths in a limited number of knowledge-intensive growth clusters to support national priorities
- levelling up communities across the country
The relief for secondary Class 1 National Insurance contributions is currently set to end for new employees after 5 April 2026. Those for SDLT, eSBA and ECA are currently set to end for new investment after 30 September 2026.
At Autumn Statement 2023, the government announced that the Freeport and Investment Zone programmes would be extended from 5 to 10 years. At the Spring Budget 2024, they announced that this would be matched by an extension for Investment Zones in Scotland and Wales.
Detailed proposal
Operative date
The measure will take effect from 21 May 2024.
Current law
There is existing legislation in section 332 Finance (No. 2) Act 2023 which allows HM Treasury to use secondary legislation to amend the sunset dates for special tax sites.
Finance Act 2021 inserted provisions into:
- Parts 2 and 2A of the Capital Allowances Act 2001 for enhanced capital allowances for plant and machinery and enhanced structures and buildings allowances respectively
- Part 4 of the Finance Act 2003 for SDLT relief
National Insurance Contributions Act 2022 contains the provisions for a zero-rate of secondary Class 1 National Insurance contributions for employers of eligible employees working in designated special tax sites on earnings up to £25,000 per annum for up to 3 years.
Proposed revisions
Legislation will be introduced to amend the sunset date for the tax reliefs in respect of special tax sites from the original 5 years to 10 years.
Summary of impacts
Exchequer impact (£ million)
Freeports
| 2023 to 2024 | 2024 to 2025 | 2025 to 2026 | 2026 to 2027 | 2027 to 2028 | 2028 to 2029 |
|---|---|---|---|---|---|
| +0 | +0 | — | -15 | -45 | -50 |
The costing for this measure was included in Table 5.1 of Spring Budget 2024 as ‘Freeports: tax reliefs sunset date extension from 5 to 10 years’ and has been certified by the Office for Budget Responsibility. More details can be found in the policy costings documents published alongside Spring Budget 2024.
Investment Zones
| 2023 to 2024 | 2024 to 2025 | 2025 to 2026 | 2026 to 2027 | 2027 to 2028 | 2028 to 2029 |
|---|---|---|---|---|---|
| — | — | -5 | -5 | -10 | -15 |
The costing for this measure was included in Table 5.1 of Spring Budget 2024 as ‘Investment Zones in England: tax reliefs and business rates retention’ and has been certified by the Office for Budget Responsibility. More details can be found in the policy costings documents published alongside Spring Budget 2024.
Economic impact
The extension of these existing measures is not expected to have any significant macroeconomic impacts. The wider economic impacts of the Freeport and Investment Zones programmes are covered in previous tax information and impact notes.
The programmes encourage new investment and job creation, and this measure is expected to have a positive economic impact on the areas whose tax reliefs have been extended.
Impact on individuals, households and families
This measure is not expected to directly impact on individuals as it primarily affects businesses investing or hiring new employees in a special tax site.
The measure is expected to have a positive impact on potential employees who work in or live near a special tax site as it makes them more attractive to hire for employers. This is through making the 3 year secondary Class 1 National Insurance contributions relief on the earnings of eligible employees working in a special tax site available for an extended period.
Employee experience is expected to remain the same, as this measure does not affect how they interact with HMRC.
This measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
It is not expected that there will be adverse effects on any group sharing protected characteristics.
Impact on business including civil society organisations
This measure is expected to have a positive substantive impact on businesses, including employers, operating in special tax sites of Freeports and Investment Zones, as they are able to benefit from tax and National Insurance contributions reliefs over a longer timeframe.
This measure is expected to have a negligible administrative impact on businesses, including employers, operating in special tax sites of Freeports and Investment Zones by extending the period in which tax and National Insurance contributions reliefs are available for investment and hire of new eligible employees. Businesses will need to continue to assess their entitlement to the reliefs and claim them.
One-off costs could include a business and intermediaries having to spend time to make themselves aware of the change to the sunset dates and updating tax software. There are not expected to be any continuing costs for the capital allowances (eSBA and ECA) and SDLT reliefs.
Continuing costs in respect of the Class 1 National Insurance contributions relief could include the cost of maintaining processes to monitor eligibility for the relief and record keeping.
For capital allowances, this measure is expected overall to improve businesses’ experience of dealing with HMRC as claims will be filed over a shorter period, reducing their time spent on tax administration.
For SDLT relief and the secondary Class 1 National Insurance contributions relief, the customer experience is expected to remain broadly the same, as this measure does not affect how businesses interact with HMRC.
Operational impact (£ million) (HMRC or other)
HMRC will not incur any extra costs implementing this change.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be monitored through information collected from tax and National Insurance contributions returns and through engagement with stakeholders and communications with the affected taxpayer population.
Further advice
If you have any questions about this change, contact:
- for SDLT relief — stamptaxes.budgetfinancebill@hmrc.gov.uk
- for capital allowances — contact.capitalallowances@hmrc.gov.uk
- for employer National Insurance contributions relief — nics.correspondence@hmrc.gov.uk
Declaration
Nigel Huddleston MP, Financial Secretary to the Treasury, has read this tax information and impact note and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impacts of the measure.