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Investment zones and freeports – similarities and differences


Published: 04 Sep 2023 Update History

Investment zones were refocused at the Spring Budget 2023. They are intended to grow the economy by focusing on places with significant unmet productivity potential and building on their existing strengths. How do they compare to freeports?

Investment zones were initially announced in the “mini-budget” in 2023 as a means to incentivise growth and investment in specific parts of the UK. Following the announcement at the Autumn Statement 2022 that the initial expressions of interest would not be taken forward, a refocused policy to use investment zones to catalyse 12 high-potential knowledge-intensive growth clusters across the UK was announced at Spring Budget 2023.  

The direct tax benefits of freeports and investment zones are broadly identical, subject to any differences for devolved taxes.  

In particular, the term “freeport tax site” has been replaced in legislation with “special tax site”. Both freeport and investment zones can have up to three special tax sites with a total maximum size of 600 hectares. 

There are, however, some differences between investment zones and freeports to be aware of:


Freeports Investment zones 

Located at sea ports and airports where goods arrive in and depart from the UK. The special tax sites associated with freeports are discrete areas close to the port itself (eg, industrial estates).

The eight freeport areas in England are:

  • East Midlands Airport
  • Felixstowe and Harwich
  • Humber
  • Liverpool City Region
  • Plymouth & South Devon
  • Solent
  • Teeside
  • Thames

The two green freeport areas in Scotland are:

  • Inverness and Cromarty Firth Green Freeport
  • Forth Green Freeport

The two freeport areas in Wales are:

  • Celtic freeport
  • Anglesey freeport

No freeports have been announced to date for Northern Ireland.

All zones will be centred around a University or local research institution and the tax sites will be located with the aim of developing brownfield sites. They are based in eight English locations and four located elsewhere in the UK with high growth potential.

The following eight broad English areas were specified in the 2023 Spring Budget:

  • East Midlands
  • Greater Manchester
  • Liverpool City Region
  • North East
  • South Yorkshire
  • Tees Valley
  • West Midlands
  • West Yorkshire


Industry focus

Freeports Investment zones 

In Scotland, green freeports are required to promote decarbonisation and a just transition to a net zero economy.

Digital and technology; life sciences; creative industries; green industries; and advanced manufacturing.

Tax benefits

Freeports Investment zones 

In addition to the five tax benefits available to special tax sites (described in the investment zone column, right), customs sites in freeports get extra VAT and customs benefits:

  • Simplified customs arrangements, including reduced documentation, delayed payment of tariffs, and customs duty inversion.
  • VAT: businesses can zero-rate certain supplies of goods that are declared to the freeport customs special procedure and that are sold between authorised freeport businesses within a customs site. Businesses can also zero-rate certain supplies of services performed by authorised persons in relation to goods that are declared to the freeport customs special procedure.
  1. Employer national insurance contributions (NIC) threshold raised from £9,100 (2023/24) to £25,000 in respect of new eligible employees for the first 36 months of their employment;
  2. Full stamp duty land tax (SDLT) relief in England and Northern Ireland for land and buildings bought for commercial use or development for commercial purposes.
    Scotland has just consulted on a draft statutory instrument to provide a similar relief from land and buildings transaction tax (LBTT) for green freeports. The Welsh government proposes to offer a specific land transaction tax (LTT) relief on relevant land transactions within special tax sites in Wales where the property is to be used for qualifying commercial activity;
  3. Full business rates relief for newly occupied business premises, and certain existing businesses where they expand in special tax sites;
  4. First year capital allowances (FYAs): a 100% first-year allowance for expenditure on plant and machinery; and
  5. Enhanced structures and buildings allowances (SBAs): 10% straight-line deduction per annum over 10 years, compared to the normal 3% straight-line deduction per annum over 33.3 years.


Additional benefits

Freeports Investment zones 

Streamlining of planning processes.

Each zone will be provided with £80m worth of support over a five-year period that can be used flexibly between spending and tax incentives. The stipulation over spending is that it should be split 40:60 between resource (day-to-day costs, such as staff wages) and capital spending (investment, such as research infrastructure).

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