UK Scottish Government agree on impact Scotland will play in levelling up agenda

14 February 2022

Paul Russell, indirect tax director at RSM UK said: ‘The green light to two new green Freeports demonstrates the pivotal role Scotland will play in delivering the UK Government’s levelling up agenda. It will be welcome news to many Scottish businesses and communities as the projects will aim to unlock growth potential, high-skilled job and regeneration opportunities in two designated areas of Scotland.

‘The tax incentives for Freeport businesses are clear with simplified customs arrangements, reduced VAT and lower rates of employment taxes, but the significant question around the overall benefits of UK freeports remain. This is due to the “no drawback” provisions inherent in most free trade deals. These provisions preclude goods produced under duty suspension from qualifying for most free trade deals that contain these clauses. As a result, goods produced in Freeports will be subject to tariffs unlike goods produced outside of these areas, placing goods produced within a freeport at a disadvantage at import. This could lead to the potential benefits of Freeports being diluted for Scottish business exporting to key markets including Canada, Norway and Turkey.

‘However, the new benefits of the Freeport status will undoubtedly encourage further growth in both investment and jobs. It is hoped that the new custom zones will encourage expansion in research and development of green energy and decarbonisation as well as boosting existing industrial sectors in Scotland.’