Find out if you can claim the enhanced capital allowance relief on qualifying expenditure for plant and machinery in a UK Freeport tax site.
Where we refer to a ‘Freeport’ on this page, this also applies to ‘Green Freeports in Scotland’ unless otherwise stated.
A Freeport tax site is an area of land where businesses can claim certain tax reliefs. They’re independent and separately authorised from Freeport customs sites, but they can cover the same area of land.
You can claim the enhanced capital allowance relief where you buy plant and machinery for use in a designated Freeport tax site.
The relief can be claimed for expenditure incurred from the date a Freeport tax site is designated until 30 September 2026.
Find out more about Freeports.
How to qualify
You can claim the relief for qualifying expenditure for plant and machinery that meets the following conditions:
- the plant and machinery must be for use primarily in a designated Freeport tax site at the time the expenditure is incurred
- the plant and machinery must be unused and not second-hand
- the plant and machinery must be for use as part of your trading activity, or an activity arising from land where the profits or losses are treated for tax purposes as arising from a trading activity
- you must be registered for Corporation Tax
How much relief you can claim
You can claim 100% of the qualifying expenditure against the profits from your qualifying activity for the accounting period in which it takes place.
Where the qualifying plant and machinery is also for use outside of a Freeport tax site and a main purpose for incurring the expenditure is to obtain the enhanced capital allowance for that part which is for use outside of a Freeport tax site, then you can only claim 100% of the qualifying expenditure which is attributable to the part of the plant and machinery which is for use in a Freeport tax site.
Find examples of how much relief you can claim.
How to claim the relief
You must claim on your tax return.
Withdrawal of relief
The primary use of the plant or machinery must continue to be for a Freeport tax site for 5 years from when the plant and machinery is first:
- used in a Freeport tax site as part of your trading activity, or your activity arising from land where the profits or losses are treated for tax purposes as arising from a trading activity
- kept for use for your trading activity in a Freeport tax site, or for your activity arising from land where the profits or losses are treated for tax purposes as arising from a trading activity
The relief that you have claimed should be withdrawn if the plant and machinery ceases to be for primary use in a Freeport tax site during the 5-year period.
You must notify us if the plant and machinery ceases to be for primary use in a Freeport tax site within 3 months.
Examples
Example 1
You purchased new plant and machinery costing £300,000 in March 2024 which was installed as integral features within your new warehouse, the construction of which was completed on 22 March 2024. The warehouse was situated in a Freeport tax site at the time the plant and machinery were purchased.
You prepare accounts for each year ending on 31 March.
In the chargeable period to 31 March 2024, you can claim the enhanced capital allowance for the entire cost of this plant and machinery, being £300,000.
Example 2
You purchased 10 new forklift trucks costing £400,000 in August 2023 to use in your manufacturing business.
You have a factory situated outside of a Freeport tax site, which you have been using in your business for many years. You have set up another larger factory, which is situated in a Freeport tax site, and which you have started to use in your business on 1 August 2023. You expect to produce twice as many goods from this new factory as from the other factory.
The forklift trucks have been purchased for moving goods around the factory sites replacing 3 existing forklift trucks. These forklift trucks are not exclusively for use for either factory and are often moved between sites as required by demand, but you decided that your existing 3 forklift trucks should be replaced as they are 6 years old, and you would be able to claim the enhanced capital allowance for the purchase of replacements.
You prepare accounts for each year ending on 31 July.
As the plant and machinery purchase is not entirely for use primarily within a Freeport tax site, you will need to apportion the cost of this on a just and reasonable basis to arrive at the enhanced capital allowance which is available.
From the information in this example, the apportionment of the expenditure qualifying for the enhanced capital allowance available for the chargeable period to 31 July 2023 could be calculated as follows.
Although these forklift trucks are expected to be used in both factories, 3 of these were purchased to replace the existing aging equipment.
Consequently, an apportionment will be needed to include only that part of the expenditure attributable to the equipment which is actually used, or held for use, in the factory in the Freeport tax site.
The apportionment would need to be made on a just and reasonable basis, which could be estimated in this example from the quantity of goods produced from each factory.
As the new factory is expected to produce twice as many manufactured goods as the older factory, the apportionment could be estimated using a ratio of 2:1.
Apportionment of the expenditure attributable to the new factory and eligible for enhanced capital allowances will be £400,000 × 2/3 = £266,667.
Enhanced capital allowance available = £266,667.
For that part of the expenditure which does not qualify for the enhanced capital allowance (£133,333), relief will be available through the annual investment allowance up to its limit (where not used to relieve other plant and machinery expenditure), or writing down allowances at the main rate.
