A business that builds, equips or hires inside a designated special tax site in a Freeport or Investment Zone can claim up to four extra reliefs: a 100% first year allowance on new plant and machinery (companies only), a structures and buildings allowance of 10% a year instead of 3%, no employer National Insurance on the first £25,000 a year of a new employee’s earnings, and relief from stamp taxes on property bought for commercial use. Each relief has its own conditions, and the window closes on 30 September 2031 for English Freeports and 30 September 2034 for Scottish and Welsh Freeports and Investment Zones.

What is a special tax site, and why does the boundary decide everything?

The reliefs do not apply across a whole Freeport or Investment Zone. They apply only inside areas designated by regulations as special tax sites. HMRC points out that special tax sites are separate from Freeport customs sites, although the two can overlap. Nothing can be claimed until the site is designated, and maps of designated sites are on GOV.UK. A building a few metres outside the boundary gets none of the enhanced reliefs.

Local partners designing an Investment Zone choose from a menu of interventions, so not every Investment Zone has a special tax site.

The original five year windows were extended to ten years (policy paper of 30 April 2024). The cut off dates are now 30 September 2031 for English Freeports and 30 September 2034 for Scottish Green Freeports, Welsh Freeports and Investment Zone sites. Section 332 of the Finance (No. 2) Act 2023 lets the Treasury move them by regulations.

How does the enhanced capital allowance on plant and machinery work?

Section 45O of the Capital Allowances Act 2001 makes expenditure on plant or machinery first year qualifying expenditure if five conditions are met:

  1. the asset is for use primarily in an area that is a special tax site when the expenditure is incurred;
  2. it is unused and not second hand;
  3. the expenditure is for the purposes of a trade (or one of the other qualifying activities named in the section);
  4. it is incurred on or before the sunset date for that site;
  5. the business is a company within the charge to corporation tax.

The allowance is 100% of the cost in the period the money is spent, under the table in section 52. Unlike full expensing, which gives only 50% on special rate expenditure such as integral features, the special tax site allowance gives 100% on both main rate and special rate assets. Sole traders and partnerships of individuals cannot use it and are left with the annual investment allowance.

The general exclusions in section 46 still apply, so cars and plant bought for leasing do not qualify. For an asset used partly outside the site, section 45Q limits the 100% allowance to the part used inside, apportioned on a just and reasonable basis.

What happens if the equipment moves out of the site?

Section 45R sets a five year period starting when the asset is first brought into use (or first held for use) in the qualifying activity. If at any time in that period the asset’s primary use, or the use it is held for, is outside the site while it is owned by the company or a connected person, the expenditure is treated as never having qualified. The company must tell HMRC how its return needs amending within three months of becoming aware of the problem.

How does the enhanced structures and buildings allowance work?

The ordinary structures and buildings allowance is 3% a year. In a special tax site the rate is 10% a year for ten years, so the whole cost is relieved in a decade rather than over 33 and a third years. It is available to income tax payers as well as companies. HMRC’s guidance sets four conditions:

  • construction began while the site was a special tax site, meaning the first contract was signed or building work began (whichever is earlier) at a time the site was designated;
  • the qualifying expenditure is incurred while the building is in the site and on or before the deadline;
  • the building is brought into non residential qualifying use on or before the deadline;
  • the claimant is registered for corporation tax or income tax.

The allowance period starts on the later of first non residential use and the date the expenditure is incurred. Where part of a building is outside the site, or part is brought into use after the deadline, the expenditure is split between the 10% and the standard rate. To claim, you need an allowance statement that says you want the expenditure to be special tax site qualifying expenditure and gives the amount. HMRC’s own example is a warehouse costing £1.2 million wholly in a site, which gives an annual claim of £120,000.

How does the employer National Insurance relief work?

Employers pay no secondary Class 1 National Insurance on a qualifying employee’s earnings up to the Freeport and Investment Zone upper secondary threshold, which HMRC gives as £25,000 a year (£2,083 a month or £481 a week). Earnings above that are charged as normal. The relief lasts for 36 months from the start of the employment, for as long as the conditions are met. The employee must:

  • be new to the employer, and not have been employed by it or a connected employer in the previous 24 months;
  • be expected to spend at least 60% of their working time in a single special tax site;
  • have started the job from 6 April 2022 and before 30 September 2031 (English Freeports) or 30 September 2034 (Scottish and Welsh Freeports and Investment Zones).

Public authorities cannot claim. The relief is given through payroll by using category letters F, I, S or L for Freeport employees and N, E, K or D for Investment Zone employees, and the workplace postcode must be included on the Full Payment Submission. If you stop expecting the 60% test to be met, you must stop using the special category letter. See employer National Insurance reliefs for the other zero rate categories.

What stamp tax relief is available, and does it differ across the UK?

In England, Schedule 6C of the Finance Act 2003 relieves Stamp Duty Land Tax on purchases, leases and lease renewals in Freeport and Investment Zone special tax sites. The buyer must intend to use the property in a qualifying way: for a commercial trade or profession, for development or redevelopment for resale, or for letting, but not for residential use. Relief is full if at least 90% of the price relates to qualifying property and partial if the qualifying share is 10% or more. There is a three year control period. If qualifying use stops and the buyer is not taking reasonable steps to restart it or sell, the relief is withdrawn and a further return and payment are due within 30 days. The relief must be claimed in a return, and section 61A of the Finance Act 2003 sets the latest claim dates as 14 October 2032 for Freeport sites and 14 October 2035 for Investment Zone sites.

SDLT does not apply in Scotland or Wales. Scotland has a separate Green Freeports relief from Land and Buildings Transaction Tax in Schedule 16D to the 2013 Act, covering the Inverness and Cromarty and Forth Green Freeport tax sites; Revenue Scotland’s guidance at LBTT3049 gives an end date of 30 September 2028 for transactions. Wales relieves Land Transaction Tax through the Land Transaction Tax (Relief for Special Tax Sites) (Wales) Regulations 2024, starting with the Celtic Freeport. Business rates relief is separate again and is granted by local authorities, for example 100% for five years in English Investment Zone tax sites.

What does a combined claim look like?

Illustration only. A company with a 31 March year end sets up in an English Freeport tax site. In the year to 31 March 2027 it signs a construction contract for a £2 million warehouse inside the site, spends £400,000 on new racking and forklift trucks used only there, and hires 10 new staff on £30,000 each who work full time on site.

Relief Effect
Enhanced capital allowance £400,000 deducted in the year the cost is incurred
Enhanced structures and buildings allowance £200,000 a year for ten years, against £60,000 a year at the standard 3%
Employer National Insurance No secondary Class 1 on the first £25,000 of each employee’s annual earnings for up to 36 months; normal employer contributions on the other £5,000

If the forklifts are moved to the company’s depot outside the site in year three, the whole £400,000 allowance is withdrawn under section 45R and the company falls back on ordinary allowances for that kit.

What mistakes cause claims to fail?

  • Claiming the 100% allowance outside a company. Condition E in section 45O limits it to companies within the charge to corporation tax.
  • No allowance statement. The 10% structures allowance depends on a statement that elects for special tax site treatment.
  • Rehiring former staff. Anyone employed by you or a connected employer in the previous 24 months does not count as new.
  • Staff split across sites. The 60% test must be met in a single special tax site, and the payroll postcode must match it.
  • Missing the three month notice. Moving plant out within five years without telling HMRC risks penalties as well as clawback.

Keep site plans, construction contracts, asset registers showing where each item is used and staff location records. They are the evidence HMRC asks for if the capital allowances claim or payroll categories are reviewed.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.