World Wide Tax News Issue 54 - March 2020

Freeports: The Government’s Vision

Following the UK’s departure from the EU, the Government sees the establishment of new Freeports as a means of “boosting trade, jobs and investment across the UK”, and on 10 February 2020 it published a consultation document, inviting responses by 20 April 2020.


The Government aims to create up to 10 Freeports across the UK. These could be airports, rail ports or sea ports, and a Freeport could be based on a collaboration between two or more ports. For example, two sea ports in close proximity could become a single Freeport; or an inland rail port may wish to become a Freeport with either a connected sea port or a nearby airport.

Applications for Freeport status will be invited through a competitive bidding process. The key criteria will be how the Freeport will help to:

  • Establish Freeports as national hubs for global trade and investment across the UK
  • Promote regeneration and job creation, and
  • Create a hotbed for innovation.

The regeneration and job creation aspects could particularly benefit coastal communities and the maritime sector. The Social Market Foundation (SMF) reported that coastal communities have had much weaker economic growth since the financial crisis than other parts of the country, with the “coastal community wage gap” (the amount by which average employee annual pay is lower than in the rest of the UK) standing at £4,700 in 2018.

The Government will work with the devolved administrations to develop proposals that would enable the creation of Freeports in Scotland, Wales and Northern Ireland.

Nature of Freeports

The Government is considering a bespoke UK Freeport model which would include multiple customs zones located within or away from a port, to maximise flexibility for port operators and businesses, as well as a type of Special Economic Zone designated over or around the customs zones, to encourage the maximum number of businesses to open, expand and invest in the Freeports.

The Government believes that to be successful, Freeports will be well integrated into the local economy, with the private sector working closely with local economic partners.

Many of the policy measures under consideration are administered by local authorities. Where Mayoral Combined Authorities (MCAs) or Combined Authorities (CAs) exist, they could submit a Freeport application on behalf of partners. Where they do not exist, the application could be submitted by the Local Enterprise Partnership (LEP) and the upper-tier authority(s) in which the Freeport site is located.

Tax and duties

Customs and tariff policy is reserved to the UK Government. The opportunity for customs and tariff benefits would be available UK-wide.

The core customs and tariff benefits the Government proposes to offer to businesses bringing goods into in a Freeport site are:

  • Duty suspension – No tariffs, import VAT or excise to be paid on goods brought into a Freeport from overseas until they leave the Freeport and enter the UK’s domestic market.
  • Duty inversion – If the duty on a finished product is lower than that on the component parts, a company could benefit by importing components duty free, manufacture the final product in the Freeport, and then pay the duty at the rate of the finished product when it enters the UK’s domestic market.
  • Duty exemption for re-exports – A company could import components duty free, manufacture the final product in the Freeport, and then pay no tariffs on the components when the final product is re-exported.
  • Simplified customs procedures – the Government intends to introduce streamlined procedures to enable businesses to access Freeports.

The Government is considering the case for changes to the following tax policies which are under UK Government control, some of which apply across the UK and others which do not, if there is sufficient evidence to show that they could be effective:

England only

England and Northern Ireland

UK Wide

Business Rate Discounts

(Currently available in Enterprise Zones (EZs))

Stamp Duty Land Tax

Research and Development (R&D) Tax Credits



Employer National Insurance Contributions



Facilitative solutions on VAT and Excise Duties for goods within Freeports



Enhanced Capital Allowances (Currently available in EZs)


Under the proposed model, declaration requirements would be simplified, reducing the administrative processes associated with moving goods into a Freeport. A reduced amount of data would be provided using existing processes (form C21) to allow goods to be cleared to leave a port, and businesses would need to complete a declaration into their own commercial records recording information about the goods that will be brought in to the UK. They would also need to provide adequate information to the Freeport operator’s records management system so that a central record of all goods in the site can be maintained.

When businesses wish to remove goods from the site, they would need to complete import declarations as normal (if releasing the goods for sale on the domestic market) or export declarations (if exporting the goods for sale overseas). It will be possible for goods to be declared to another customs procedure on leaving the Freeport site, for example transit.

Currently, businesses bringing goods into the UK from outside the EU via a UK port also need to submit Entry Summary Declarations for safety and security purposes before arrival and submit manifest information to notify the customs authority that the goods have arrived at the port. These processes for goods entering a port will not differ in respect of Freeports.


The Government also recently announced the introduction of import controls on EU goods at the border after the transition period ends on 31 December 2020. This appears to imply that full customs declarations would be required for all imports and exports from January 2021, and that simplified procedures and postponed accounting for import VAT would no longer be available.

Taken together with the launch of the Freeports consultation, this suggests that the Government intends to channel future tax, duties and administrative benefits through Freeports, to support its aims of UK-wide investment, regeneration, job creation and innovation.

This would no doubt result in both national and regional relocation of businesses and individuals into Freeport areas, with significant impact on local economies, and we can expect considerable competition by applicants for Freeport status.

Read the Freeports consultation document.

Juliet Wallwork
[email protected]

Michael Simms
[email protected]

Sue Bill
[email protected]