Government’s Growth Plan 2022 includes generation of ‘investment zones’ to encourage rapid development and business investment
Investment Zones are designed to accelerate the housing and infrastructure the UK needs to drive economic growth.
They would cut back unnecessary red tape that slows down development, cut taxes to back business, and, as a result, attract new investment to create jobs, according to the Plan.
Specified sites in England could benefit from a range of time-limited tax incentives over 10 years. These include paying no employer national insurance on salaries of staff who meet certain requirements. In full, the tax incentives under consideration are:
Employer National Insurance contributions 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.
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 5 years.
Stamp Duty Land Tax – a full SDLT relief for land and buildings bought for use or development for commercial purposes, and for purchases of land or buildings for residential developers.
The Government is in talks with 38 local authorities across England to establish investment zones and will work with Scotland, Wales and Northern Ireland to drive local growth there. Areas in England include Blackpool, Cornwall, Essex, Greater Manchester, Liverpool, North Yorkshire, Plymouth, Somerset and Warwickshire.
However, investment zone plans are far from confirmed. Introduced by the then Chancellor, Kwasi Kwarteng, the plan was subsequently backed by his successor, Jeremy Hunt, who said ‘I totally support the benefits that investment zones can bring, but we will implement that policy in a way that learns the lessons of when similar models have been tried in the past and we will make sure they are successful.’ It remains to be seen whether Hunt will continue to back the plan in his Autumn Statement on 17 November.
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