BRODIES: Freeport launch spells opportunity for public and private …
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Laura Petrie, partner at Brodies LLP.
Laura Petrie, a partner and Marc Penman, a solicitor at Brodies LLP, specialising in oil and gas discuss the Green Freeport.
The winning bid for Inverness and Cromarty Firth (ICF) Green Freeport is the good news story of 2023 for the Highlands and welcome news to local industries, particularly the offshore energy market. The prospects for job creation, commercial activity and investment will be significant and both private and public sector bodies should be on the front foot with their preparations, to make the most of the opportunity.
The establishment of a ‘free trading zone’ means that port operators and companies operating there can defer tax duty and import VAT on goods, as well as other employee-related contribution deductions. This allows for advanced manufacturing of technologies for the energy industry, including offshore wind, hydrogen production, oil and gas decarbonisation, while also offering tax and customs incentives. These benefits will help to attract investment to the energy industry and the local area, as well as boosting the job market and opportunities for the wider supply chain.
Finalising regulatory arrangements for the operation of the ICF Green Freeport is expected to take a year, and a further 12-18 months for its full development. While this might seem a lengthy wait, those that wish to use the freeport should capitalise on that transitional period by preparing now.
Marc Penman, solicitor at Brodies LLP.
Access to a freeport can benefit businesses and organisations in many ways, whether they are in the energy industry or not. The tax benefits of operating import, manufacture and export activities within a free trade zone provide significant savings for businesses that import raw materials (e.g. steel, concrete) to manufacture items that will never be used within the onshore market. Similarly, organisations can benefit from differing tax rates if the raw materials are manufactured into different goods within the free trade zone, before being ‘exported’ into the UK.
In addition, 100% relief from Non-Domestic Rates will be available to new and certain existing businesses within the freeport tax sites, as well as partial relief for existing businesses that expand into:
• new or additional property,
• existing property, or
• an unused part of an existing property following redevelopment
Eligible businesses will receive relief for five years from the point of first receiving it (no earlier than October 2023) and applications will be open for five years from the date of tax site designation, to incentivise early development.
The full potential is yet to be determined but these principles are inherent in other freeports worldwide, so the ICF Green Freeport
will likely follow suit.
For now, businesses planning to use the freeports for manufacturing should consider how operating within a free trade zone would impact on their tax status and whether their operations could be relocated there.
For supply chain companies servicing the offshore energy industry, establishing a place of business within the free trade zone may be possible. The ability to pass on cost-efficiencies to customers can be a competitive advantage. Furthermore, relief on national insurance contributions is expected to be available to employees who spend at least 60% of their time working within the free trade zone. To ensure that all employees benefit and no business is disadvantaged, the ICF Green Freeport intends to reinvest the NIC reliefs into training and skills development.
Accordingly, relocation to the free trade zone should be considered, including whether employees can move there under current contracts (i.e. can their place of work be dictated by the employer).
There are other benefits to consider too. Increased investment in the area means increased footfall and accommodation demand – either for a company’s workforce or in the provision of temporary and permanent accommodation.
Industries involved with energy services should also consider whether they want to be involved in business centred around the freeports. Plans have already been proposed for a green hydrogen plant near the ICF Freeport – warmly welcomed by local distilleries. Development of that site provides significant opportunities for the supply chain and scope for new property development to benefit from the energy produced.
Businesses interested in the ICF Green Freeport should use the time they have now to conduct commercial health checks. Reviewing policies, procedures and standard contract terms to ensure they comply with current regulations, and preparing free trade zone-specific versions, will ensure readiness ahead of the freeport’s formal opening.
The ICF Green Freeport is a significant long-term investment in the Highland region, with wider implications for Scotland and the energy industry. This should be a green light for any interested businesses and organisations to start planning now, so they are ready when the freeport goes live.
Clava House, Cradlehall Business Park, Inverness IV2 5GH
T: 01463 214390
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References
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