Within the investment zones announced as part of the mini-Budget last week, there will be designated development sites where planning regulations will be relaxed to encourage house building.
The zones will also benefit from greater control over local funding. Mayoral combined authorities that agree to host an investment zone will receive a single local growth settlement in the next spending review period.
Similar to freeports, investment zones will also be able to designate specific tax sites that will benefit from a range of time-limited tax incentives over 10 years. Although the detail will be finalised in due course, the tax benefits under consideration for specified sites in England are:
- business rates relief – 100% relief from business rates on newly occupied business premises and certain businesses that expand within or into a tax site. Councils hosting the investment zones will receive 100% of the business rates growth in designated sites above an agreed baseline for 25 years to invest in further growth.
- enhanced capital allowance – 100% first year allowance for companies’ qualifying expenditure on plant and machinery for use in tax sites.
- enhanced structures and buildings allowance – accelerated relief to allow businesses to reduce their taxable profits by 20% of the cost of qualifying non-residential investment per year, relieving 100% of their cost of investment over five years.
- employer’s national insurance contributions (NIC) relief – zero-rate employer’s NIC on salaries of any new employee working in the tax site for at least 60% of their time, on earnings up to £50,270 per year, with employer NIC being charged at the usual rate above this level.
- stamp duty land tax (SDLT) – a full SDLT relief for land and buildings bought for use or development for commercial purposes, and for purchases of land or buildings for new residential development.
These benefits are very similar to those available to businesses operating within a freeport tax site. However, in some cases, they are more generous than those within a freeport tax site. For instance, the enhanced structures and buildings allowance in an investment zone allows a business to relieve 100% of the cost of their investment over a period of five years rather than ten. The employer’s NIC relief in an investment zone is available for employees with a salary of up to £50,270 per year, rather than £25,000 available in a freeport.
Unlike freeports, investment zones will not be able to designate customs sites; specific areas of land that benefit from customs duty benefits and simplifications.
The government has stated that it remains committed to the progress of the freeports programme and will work with current and prospective freeports to see whether investment zones can further support their objectives. It may be that the benefits available within freeport tax sites are ‘upgraded’ to bring them in line with those available within investment zone tax sites.
The government will also work with devolved administrations to deliver investment zones in Scotland, Wales and Northern Ireland. The benefits available may differ to those listed above, in the same way that ‘green freeports’ in Scotland do not offer the same benefits to freeports in England.
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