Mini-Budget 2022: Investment zones

In order to bolster parts of England against the economic crisis, the Chancellor announced today plans for new ‘low tax zones’ in certain parts of the country. Labelled ‘Investment Zones’ these areas will have an objective to drive growth and unlock housing.

The government will be working with 38 areas across the country to introduce these Investment Zones. It is also in discussion with the devolved administrations to introduce Investment Zones in Scotland, Wales and Northern Ireland.

Investment Zones will be designated physical areas. Businesses located within them will benefit from tax incentives and planning liberalisation. The measures are part of the government’s Levelling Up and economic growth plans.

Incentives are described as being ‘under consideration’

• 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.
• 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 (NICs) 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.
• Stamp Duty Land Tax (SDLT) – 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.

The government also noted that the tax incentives will operate for a time-limited period of 10 years.

While these will benefit businesses within these Investment Zones, it seems that little has been done for businesses outside these proposed low tax areas. As more details are released, businesses will need to assess whether the benefits are compelling enough for them to make a move.

Details of the 38 locations under consideration can be found on the government website.

It should also be noted that there is an interaction with the government’s previous policy to introduce Freeports in the UK. It is possible that some of the existing or proposed Freeports will also become Investment Zone sites so that the two programmes complement each other. More information on the VAT and Customs impact of Freeports can be found in this article.

Businesses are advised to monitor further developments as more detailed information becomes available, such as the specific location of the sites and details of the tax reliefs and their qualifying conditions.

For any queries in the meantime, please contact Andrew Hawley, Rob Marchant or your usual Crowe contact.