Freeport operators will be able to take advantage of a zero rate of secondary National Insurance contributions (NICs) for employees as part of the government’s plans to increase trade post Brexit
HMRC has issued a tax information and impact note confirming the level of Class 1 NICs’ relief for eligible employers and employees working in the 10 proposed freeport tax sites across the country.
In Great Britain (England, Scotland and Wales), this measure will provide those employers with physical premises in a freeport tax site with a zero rate of secondary Class 1 NICs on the earnings of new employees who spend 60% or more of their working time within a freeport tax site. This rate can be applied on the earnings of all new hires up to £25,000 per annum from April 2022 for 36 months per employee.
In Northern Ireland, this measure provides for the introduction of a secondary Class 1 NICs’ relief in Northern Ireland freeports and provides the Treasury with the power to legislate for the details of policy design through regulations at a later date.
All new eligible hires on or before 5 April 2026 will be eligible for this relief for their full eligibility period (up to 36 months), regardless of the government’s decision on whether to extend access to the relief for new claims beyond this date. It is possible the scheme will be extended to 2031, subject to a review scheduled for 2026.
There will be eight freeports based at Midlands Airport, Felixstowe and Harwich, the Humber region, the Liverpool City region, Plymouth, Solent, Thames and Teesside.
This measure will be legislated for in the National Insurance Contributions Bill 2021 and will have effect from 6 April 2022 onwards.
The relief will require changes to HMRC IT systems to allow for a new NICs’ category letter. Additional resource will also be required to support safe delivery, with HMRC estimating development costs of £2m.
Operators of freeports will be entitled to a number of investment tax breaks, available until 30 September 2026, including an enhanced 10% rate of Structures and Buildings Allowance for constructing or renovating non-residential structures and buildings within freeport tax sites, once designated. To qualify, the structure or building must be brought into use on or before 30 September 2026.
An enhanced capital allowance of 100% for companies investing in plant and machinery for use in freeport tax sites in Great Britain will also be available. This will apply to both main and special rate assets, allowing firms to reduce their taxable profits by the full cost of the qualifying investment in the year it is made.
There will also be full relief from stamp duty land tax on the purchase of land or property within freeport tax sites in England. Land or property must be purchased and used for a qualifying commercial purpose.
HMRC policy paper, Zero-rate of secondary NICs for Freeport employees