Fiscal Event: What do we know about the new Investment Zones?

'Levelling up' to take on more of a tax focus with the Government’s new ‘Investment Zones’.

Levelling up’ to take on more of a tax focus with the Government’s new ‘Investment Zones’.

During her leadership campaign, Liz Truss platformed kickstarting the economy through ‘Investment Zones’. These Investment Zones are to be established in partnership with local authorities with the goal of driving the UK’s economic growth and significantly accelerating the delivery of additional housing. There is an expectation that the zones will bring forward additional development that is a mix of both commercial and residential development. Within the boundaries of the zones a number of time-limited tax incentives and planning simplifications will apply, and other additional support will be available to local leaders. Additional guidance has now been published by the Government setting out how Investment Zones will work in England. In this article we set out what we know so far.

What are ‘Investment Zones’?

According to guidance published by the Government, Investment Zones in England will be one or more specific sites within a Mayoral Combined Authority (or Upper Tier Local Authority where there is no Mayoral Combined Authority) where certain planning benefits, tax incentives and wider support for local growth will be available. The Government intends that Investment Zones will complement Freeports and it is possible for existing Freeports to apply to become Investment Zones.

Where will they be located?

The Government has yet to announce where these zones are to be located, but discussions are ongoing with around 40 local authorities in England. Detailed criteria that sites will need to meet will be set out with the launch of the Expression of Interest process. The Government guidance notes that final offers to authorities will be subject to the passage of legislation enabling the associated tax reliefs and simplified regulations through Parliament.

It is intended that Investment Zones will be UK-wide and therefore the UK Government will work in partnership with devolved governments to agree how Investment Zones can be delivered in Scotland, Wales, and Northern Ireland.

What tax incentives will be on offer in England?

The Government is proposing to offer a range of time-limited tax incentives over 10 years in Investment Zones in England. The tax incentives currently under consideration include business rates, Stamp Duty Land Tax (SDLT) and Employer National Insurance Contributions (NICs) relief, as well as enhanced capital allowances and structures and buildings allowance.

Business rates relief

The Government is considering offering 100 percent 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 would receive 100 percent of the business rates growth in designated sites above an agreed baseline for 25 years.

Enhanced capital allowances

A 100 percent first year allowance is proposed for companies’ qualifying expenditure on plant and machinery assets for use in tax sites.

Enhanced structures and buildings allowance

This accelerated relief would allow businesses to reduce their taxable profits by 20 percent of their expenditure on qualifying non-residential buildings or structures per year, relieving 100 percent of their cost of investment over five years.

Employer NICs relief

The Government is considering offering businesses zero-rate Employer NICs on the salaries of new employees working in the tax site for at least 60 percent of their time, on earnings up to £50,270 per year, with Employer NICs being charged at the usual rate above this level.

SDLT relief

Full SDLT relief is to be given for land and buildings bought for use or development for commercial purposes, and for purchases of land or buildings for residential development. This is a wider relief than that currently available for property acquired within a Freeport.

Other benefits

Investment Zones will benefit from a “liberalised planning process” and the process to obtain planning permission will be streamlined.

In addition to tax and planning benefits, the Government says that it will offer additional support to local leaders to “ensure that their Zones can innovate, and have the infrastructure and skilled workforce they need.” This is to be decided based on the requirements of each Investment Zone, but could include:

  • Wider support for local growth, such as through greater control over local growth funding and, in the case of Mayoral Combined Authorities hosting Investment Zones, a single local growth settlement in the next Spending Review period;
  • Strategic direction over affordable housing fund; and
  • Prioritised access to infrastructure funding