The government has confirmed its intention to establish eight new Freeports in Solent, East Midlands Airport, Felixstowe & Harwich, Humber, Liverpool City Region, Plymouth & South Devon, Teesside and Thames. In our latest Freeport bitesize briefing, we look at some of the potential commercial contracts and supply chain opportunities for businesses looking to operate in these Freeports.
There are generous customs and taxation benefits within Freeport sites. Some of these are time limited. The incentives include:
Freeports customs sites
- Duty deferral from a port of entry to a separate Freeport customs site so that there are no tariffs, import VAT or excise until the goods leave the Freeport.
- Duty inversion so that where a company manufactures products within the Freeport and the finished product attracts lower UK import duties than its components, only the lower import duties will be payable.
- Duty exemption where goods are imported for manufacture within the Freeport and re-exported.
- Simplified customs procedures.
Freeports tax sites
- Business rates relief.
- Enhanced 100% capital allowances for new plant and machinery.
- Enhanced structures and buildings allowances of 10% over 10 years.
- Relief from stamp duty land tax.
- Relief from employer national insurance contributions.
Given these customs and taxation benefits and the increase of global, and often just in time, supply chains Freeports may provide welcome post Brexit opportunities for businesses to maximise benefits and profitability and/or mitigate risk and exposure under both new and existing contracts and as part of its supply chain and risk management.
In relation to import and export operations, Freeports could become national hubs for global trade. Businesses looking to import goods into Freeports could benefit from simplified customs procedures. Businesses looking to hold goods at Freeports and then re-export the same goods outside the UK may not incur UK VAT and duties. Businesses looking to hold goods at Freeports and then distribute the same goods within the UK could benefit from duty deferral with UK VAT and duties only payable once goods enter the UK from the Freeport site. This could enable businesses to hold and/or schedule stock and to manage cash flow by deferring customs and tax payments. This could, for example, be of interest to exporters to the UK or its neighbours who wish to trade with Europe and other trading partners without having to cross a UK VAT and duties border.
As for warehousing, storage and logistics operations, Freeport customs sites (with the tax and customs benefits mentioned above) could offer warehousing, storage and logistics opportunities for trade, trans-shipment, import and re-export operations. This could, for example, allow businesses to hold goods in stock ready for onward shipment as and when required, manage cash flow by deferring customs and tax payments and mitigate risk of disruptions to global supply chains and just in time deliveries.
Using manufacturing operations as an example, businesses could benefit from enhanced 100% capital allowances for new plant and machinery. Materials, parts or components imported into Freeports could benefit from simplified customs procedures. Businesses looking to add value to imported materials, parts or components within the Freeport site (for example by assembly or production) could benefit from duty exemption (where resultant goods are re-exported) or duty inversion with UK VAT and duties only payable once resultant goods enter the UK from the Freeport site.
Where Freeports may present trade opportunities business should consider reviewing its supply chain including existing supplier and customer contracts and templates (for example in relation to incoterms, regulatory requirements (including rules of origin), pricing and payment, currency, delivery, responsibility for import / export requirements and force majeure) to ensure these provide a suitable level of protection.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.