If your business is in one of the newly created Freeports it’s entitled to special tax relief for capital expenditure. What does this tax break apply to and how is it claimed?
Location
The creation of Freeport sites was announced by the Chancellor in March 2021 but it took until November for the government to designate exactly where the first of these would be located (see The next step ). More Freeport areas will be designated. Businesses operating in Freeports are entitled to various tax breaks including enhanced capital allowances (CAs). These apply to new expenditure on plant and machinery, plus structures and buildings.
Structures and buildings
If your company or unincorporated business incurs expenditure on a structure or building for use in its trade in a Freeport area, it can claim the enhanced structures and buildings allowance (SBA). Usually, the SBA deduction is equal to 3% per annum of the money your business spends but for businesses in Freeports the SBA rate is 10%. HMRC has now published detailed information about the conditions to qualify for the enhanced SBA. Essentially, expenditure must be incurred by 30 September 2026 and the building or structure must be in use by your business by that date. Tip. Claims for the enhanced SBA must be made in the SBA area of your tax return and be accompanied by an “allowance statement” (see The next step ).
Plant and machinery
Your business can claim enhanced CAs for expenditure incurred on plant or machinery (P&M). In other words, you can claim 100% of the cost of the P&M for the accounting period of purchase without impacting your annual investment allowance. A key difference between the enhanced P&M allowance and the enhanced SBA is that to claim it your business must be liable for corporation tax. Plus, the P&M must be unused, not second hand and employed in your company’s trade. The enhanced allowance should be claimed in the CAs section of your company’s self-assessment return.
The tax break is a 10% per annum capital allowance for expenditure on structures and buildings, and a 100% deduction for plant and machinery. The former can be claimed by all businesses but the latter only by companies. Claims must be made on self-assessment returns.
The next step
HMRC’s latest guidance on claiming enhanced CAs
Maps showing Freeport areas
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