What are the tax incentives of the Wirral Waters development?

What are the tax incentives of the Wirral Waters development?

Following the UK's departure from the EU, the UK Government announced in their 2021 Budget that a key part of their economic plans was the creation of Freeports around the UK.

The UK Government proposed in their 2021 Budget to create Freeports around the UK, in efforts to boost national and local economies. The Liverpool City Region (LCR) Freeport will contain Wirral Waters a Tax Site with a focus on supply chains, manufacturing, logistics and innovation.

With Liverpool being the country's leading transatlantic port, it is a natural Freeport location.

In this blog we look at what a Freeport status means, Freeport tax zones (specifically Wirral Waters), the investment support available, economic incentives, tax reliefs and how it will benefit businesses operating within the Freeport.

What is the regeneration project for Wirral Waters?

The 300-acre Wirral Waters development is one of the largest mixed-use regeneration projects in the UK. Wirral Waters masterplan with East Float continuing to be developed out for sustainable waterside residential, educational, commercial and leisure uses.

With excellent road, rail, sea and air links, the area offers strategic advantages to local, regional, national and international business and trade. Wirral Waters is centred on the Wirral Dock system on the banks of the Mersey, where it overlooks Liverpool’s world-class city waterfront.

Business accommodation at the site will be plentiful with space for SMEs, entrepreneurs and major national and international companies.

Wirral Waters is a nationally significant regeneration site that will support manufacturing and, through the creation of a £23m Maritime Knowledge Hub, will be a focus for dedicated maritime and decarbonisation innovation.

The site also includes the Peel International Trade Centre (Peel ITC), a trading ‘gateway’ for overseas companies to access new markets in the UK and Western Europe. The development is planned to create up to 20,000 new jobs in Wirral with the infrastructure to help deliver skills and training opportunities for local people of all ages.

The scheme will provide space for:

• Offices
• Retail
• Culture, education, leisure and community
• Hotel and conference facilities
• New homes
• Trade centre

The site is part of the wider Liverpool City Region Freeport which includes Liverpool John Lennon Airport, Port Salford, Wirral Waters and the Manchester Ship Canal. The Freeport is part of the Governments plan of levelling up through regeneration, inward investment and job creation.

What are enterprise zones?

Enterprise zone status is designed for supporting businesses and encourage inward investment and economic growth in designated areas across England. They provide tax breaks and Government support.  An enterprise zone can be a great place to set up or run a business with inward investment being high, access to the international market and tax benefits for companies within the zones.

What will the tax incentives be for businesses in Wirral Waters?

As part of the Freeport initiative, freeport tax zones are being created that offer great tax benefits for businesses operating within the zones.

Customs Duty and Import VAT

There are several benefits for businesses operating within the tax zone regarding VAT and Customs duties, these include:

• Duty deferral when goods are on site

This will only be charged on goods if and when they are released from the Freeport, or after a set period of time.

• Duty inversion

In some cases, finished goods leaving the Freeport may attract a lower tariff than the duty rate that would be applied to their component parts. 

• Customs duty exemption

If you import goods into a Freeport and process them into finished goods, and then re-export them, you will not be required to pay VAT or duty on them. 

Capital Allowances

Available on purchases of Plant and Machinery or building new structures in the Freeport zones.

Companies will be able to claim 100% Enhanced Capital Allowances on the purchase of new and unused Plant and Machinery for a trade being carried out at the Freeport site.

The purchase will need to be incurred before 30 September 2026 for the item to qualify.

Also, qualifying expenditure on structures and buildings within a Freeport zone will qualify for Enhanced Structures and Buildings Allowance at 10% per year for 10 years on expenditure incurred before 30 September 2026. A significant increase on the current level of 3% per year for 33 years for non-Freeport areas.

Stamp Duty Land Tax Relief (SDLT)

This is available on land purchased within Freeport sites, provided the property is to be used for qualifying commercial activity. This is expected to apply until 31st March 2026.

The relief will be available for transactions involving ‘Qualifying Freeport land’ with an effective date between the date a Freeport site is formally designated and 30 September 2026. Qualifying Freeport land means land that is situated in a designated Freeport tax site and which is purchased with the intention that it will be used in a ‘qualifying manner’.

For purposes of SDLT relief, ‘qualifying manner’ means that the land must be used, developed, redeveloped or exploited by the purchaser, or a connected person, in the course of commercial trade or profession.

Business rate relief

Full business rates relief will be available to eligible businesses for freeport tax sites in England once designated. Relief will be available to all new businesses and certain existing businesses where they expand until 30 September 2026. Relief will apply for five years from the point at which each beneficiary first receives relief.

National Insurance

Reduced Employers NIC’ will apply for all new workers hired from April 2022 (subject to the limits and salary thresholds).

There are three key requirements to be aware of before the incentive can be claimed:

1. the employer must have physical premises within the Freeport site
2. the employee must be a “new” hire employed between 6 April 2022 and 5th April 2026
3. the employee must be expected to spend 60% of their working time within the Freeport site

Customs zones

There will be a range of Customs Zones located within the LCR Freeport across a range of sectors that may benefit from advanced and biomanufacturing, to logistics and ports. These customs zones offer simplified customs procedures and customs rules. These sites still need to undergo an approval process with Government/HMRC.

What does it mean for the local economy within Liverpool City Region?

These Freeports create opportunities for businesses dealing in importing or exporting and operating in these Freeport areas.

They also present a significant opportunity for businesses in the leisure and hospitality sectors as the areas are developed and both businesses and individuals move into the designated areas.

It's estimated that the freeport could add £850m to the regional economy alongside boosting research and development and green technologies to help the area reach net zero by 2040 at the latest.

How can HWCA support your business in Wirral Waters?

Business owners that are considering relocating to a Freeport area need to understand the potential opportunities and seek early advice on the benefits to their business.

Haines Watts are able to support and advise businesses in all sectors that are developing or relocating a business into the Liverpool City Region Freeport and Wirral Waters tax zone. Our tax advisors are experts in corporate tax planning, VAT & customs duty, international tax planning and tax reliefs including research and development.

Our experienced tax team based in our Liverpool and Wirral offices can advise on tax incentives around customs duty, VAT, employment taxes and a wide range of indirect taxes that you need to consider.

Our directors and team are committed to support businesses in the North West. We understand the opportunities that Freeports offer to businesses, and we can advise on how your business can make the best of these opportunities and access available incentives.

Our tax, accountancy and business advisors can advise on:

• Tariffs and Customs Duties
• VAT
• Capital Allowances
• Stamp Duty Land Tax & Business Rates
• R&D 
• Tax Compliance Reporting

Conclusion

With a current lack of quality business accommodation in the Wirral areas, the Freeport site will create a perfect environment and opportunities for SMEs. Wirral Chamber of Commerce is backing the initiative and will be there to support local businesses.

The granting of Freeport status is a major win for Wirral and the wider Liverpool City Region. With the opportunity for investment, international trade, freeport customs zones, tax benefits and creation of well-paid, highly skilled jobs, the area will attract the best businesses and local talent. This, alongside the significant investment in Birkenhead and across the left bank will transform Wirral’s economic status and attractiveness.

For more help and advice, contact our advisors in Wirral, Chester or Liverpool.