The Chancellor has targeted 2.5% growth and to support this has announced the creation of investment zones, offering substantial tax breaks for businesses
The government will work with the devolved administrations and local partners to introduce investment zones across the UK. These areas are designed to drive growth and encourage investment in housing.
Areas with investment zones will benefit from tax incentives, planning liberalisation, and wider support for the local economy.
Specified sites in England will benefit from a range of time-limited tax incentives over 10 years.
The tax incentives under consideration are:
• business rates – 100% relief from business rates on newly occupied business premises, and certain existing businesses where they expand in English investment zone tax sites. Councils hosting Investment Zones will receive 100% of the business rates growth in designated sites above an agreed baseline for 25 years;
• enhanced capital allowance – 100% first year allowance for companies’ qualifying expenditure on plant and machinery assets for use in tax sites; and
• enhanced structures and buildings allowance – accelerated relief to allow businesses to reduce their taxable profits by 20% of the cost of qualifying non-residential investment per year, relieving 100% of their cost of investment over five years;
• employer National Insurance contributions relief – zero-rate employer NICs on salaries of any new employee working in the tax site for at least 60% of their time, on earnings up to £50,270 per year, with employer NICs being charged at the usual rate above this level; and
• stamp duty land tax – a full SDLT relief for land and buildings bought for use or development for commercial purposes, and for purchases of land or buildings for new residential development.
Nimesh Shah, CEO at Blick Rothenberg said: ‘The government wanted to ‘turbo charge’ its levelling-up agenda through the creation of tax advantaged investment zones around the country – 100% business rates relief, full stamp duty relief, zero employer’s National Insurance for a worker earning up to the basic rate and uncapped first year capital allowances and enhanced buildings allowance relief. The evidence of success of such enterprise zones will only be known when they eventually come live (if they do at all).’
Matthew Hodkin, tax partner at Norton Rose Fulbright, said: ‘The creation of new investment zones has the potential to generate investment in those areas in a similar way to the enterprise zones of the 1980s.
‘While the value of accelerated tax depreciation for start-up businesses can be questionable if the business is not yet profit-making, exemptions from employers’ National Insurance contributions and business rates will have real cash value.’
The government is in early discussions with 38 local authorities who have already expressed an initial interest in having a clearly designated, specific site within their area.
The scheme will also be available in Scotland, Wales and Northern Ireland, and plans to work in partnership with the devolved administrations and local partners to achieve this.
The freeport scheme will not be affected by the development of investment zones, the government said.