A free port or “free zone” is an area that is inside the geographic boundary of a country, but which is legally considered outside the country for customs purposes.
Freeports operate as secure customs zones, usually located at ports or airports, where business can be carried out inside a country’s land border, but where different customs rules apply.
They allow ‘added value processes to take place and duty is only paid on goods leaving the Freeport as a finished product and entering the UK market. No payment is due if the goods are re-exported.
Free ports have existed for centuries and up to 2012 Britain operated several free ports in Birmingham, Belfast, Cardiff, Liverpool, Prestwick and Southampton and only ceased when the government stopped renewing their licences.
The Government believe the new Freeports will create national hubs for trade, innovation and commerce, levelling up communities across the UK, creating new jobs, and turbo-charging the economic recovery.
To meet these objectives, they are proposing to combine five sets of measures – customs, tax reliefs, planning, regeneration funding, and innovation.
The successful bids for Freeports in England were announced in the latest Budget and are; East Midlands Airport; Felixstowe & Harwich; Humber; Liverpool City Region; Plymouth and South Devon; Solent; Teesside and Thames.
They are expected to launch in England in the latter half of this year following the bidders working with the Government since the announcement.
Each Freeport is a collaboration of a wider economic zone between Local Authorities; LEPs; Port owners and other interested parties in each area as they can extend to a 45km diameter zone.
The areas which are given Freeport status will also benefit from a wide package of tax reliefs, including on purchasing land, constructing or renovating buildings, investing in new plant and machinery assets and on Employer National Insurance Contributions.
Streamlined planning processes and government funding will also be provided within those areas. The purposes of the reliefs will be to incentivise business investment in capital assets and employment.
There have been concerns raised which cover tax evasion/avoidance and money laundering. Whilst these are risks, appropriate checks and due diligence and continued monitoring will be key to the success of the Freeports.
The most recent issue raised is that the post-Brexit trade deals negotiated include preventing exporters who had benefited from not paying import duty also benefiting from reduced tariffs when re-exporting.
With the continued of impact on businesses in the meantime from Brexit, and whilst many issues have subsided and the grace period for health certificates on imports such as meat and milk extended to October and in-person inspections on such animal products due from July will now begin in January 2022.
Businesses are still having to manage the extra administration and costs whilst developing solutions for when the grace period ends, but without knowing what the new process will look like, this all creates more uncertainty.
Whilst it isn’t easy when you are in the midst of the day to day activity to review your finance requirement; reviewing existing facilities, planning ahead and anticipating your cashflow needs, will allow you to find the best option, either your current provider or other alternatives, ahead of time and remove potential barriers to growth.
by Diane Davies Senior Commercial Manager at Snowball Group
t: 07735 495068