Angus MacLeod, Partner & Head of Inverness Office at Wright, Johnston & Mackenzie LLP (WJM), offers updates on why the Freeport tax status is important to the Highland Business Community.
The recent establishment of tax sites within the Inverness and Cromarty Firth Green Freeport (ICFGF) is a significant milestone for the region, offering a range of valuable tax incentives for both new and expanding businesses. Whether you’re an investor looking to break into the Highland market or an established business exploring growth opportunities, the ICFGF’s tax benefits can play a pivotal role in strategic planning.
We’ve been closely following developments surrounding the Green Freeport initiative and begun producing a series of guides to help business owners navigate the complex legal landscape and unlock the financial advantages available within this zone.
Among the key incentives available in the ICFGF are reductions on National Insurance contributions, Enhanced Structures and Buildings Allowances, Enhanced Capital Allowances, and full Non-Domestic Rates relief. However, one of the most impactful opportunities – particularly for businesses looking to acquire or lease land – is the potential for relief from Land and Buildings Transaction Tax (LBTT).
Understanding Land and Buildings Transaction Tax (LBTT) Relief
LBTT can represent a significant cost in any property transaction, but within the ICFGF, qualifying businesses can benefit from up to 100% relief on this tax, making land purchases or leases much more cost-effective.
As of October 2024, the LBTT rates for commercial property are:
- 0% for the first £150,000 of value.
- 1% for values between £150,001 and £250,000.
- 5% for anything above £250,000.
- Within the ICFGF, this tax can be reduced or eliminated altogether if the transaction meets specific conditions. To qualify for the full LBTT relief, at least 90% of the land’s value must be attributed to “Green Freeport Land,” and the transaction must be completed by 30 September 2028. Furthermore, the land must be used for commercial purposes, such as trade, development, or generating rental income.
Even if all the land doesn’t qualify, partial relief is still available. For instance, if only 50% of a plot is used for qualifying purposes, then 50% of the LBTT can be relieved. This flexibility allows businesses to make more informed decisions about land use within the Green Freeport boundaries.
For example, if a business purchases a 10-acre plot within the ICFGF for £100,000 per acre, and only 50% of the land is used in a qualifying manner, the tax payable would be reduced by 50%, resulting in an LBTT reduction from £38,500 to £19,500.
In another case, if 80% of the land qualifies, the LBTT payable would drop from £38,500 to £7,700.
While the potential for LBTT relief is a major draw for businesses, there are important exclusions that should be noted. Relief does not apply to land used for residential purposes or any land held for resale without development. Similarly, land intended to be developed into residential property is excluded from these tax breaks. Businesses should carefully consider how they plan to use their land to ensure they are eligible for relief.
Navigating the regulations surrounding LBTT and the other tax incentives available in the ICFGF can seem daunting, but the rewards could be significant. With careful planning and the right advice, businesses can take full advantage of this unique opportunity to reduce costs and fuel their growth.
For further advice and assistance, call the experts on our corporate team on 01463 234445 or email corporate@wjm.co.uk