Freeports: WJM Advises on Benefits of Enhanced Capital Allowances
The Inverness and Cromarty Firth and Forth Green Freeports offers significant benefits to businesses that are in a position to take advantage of them.
In the third article of our dedicated Freeports series exploring these benefits in more detail, our trainee solicitor Keturah Adam looks at one of the most valuable yet often overlooked tax perks - enhanced capital allowances.
If you run a business that incurs machinery costs, this is one benefit that should be on your radar.
A company operating within the Green Freeport tax site that is investing in new plant and machinery can deduct 100 per cent of the cost from the profits before corporation tax is applied.
That can represent a potentially huge saving and provides a fantastic incentive to invest.
Who qualifies?
There are certain criteria you must meet to qualify for enhanced capital allowances. The assets must be:
• Used primarily within a Green Freeport tax site
• Brand new and unused, and
• Be used as part of the trading activity.
Let’s say a business operating within a Green Freeport tax site makes a £1.5 million profit in a year and decides to invest £500,000 in brand-new manufacturing equipment. Thanks to the 100 per cent first-year enhanced capital allowance, the company can deduct the full cost of that investment from its taxable profits immediately.
This means that instead of paying corporation tax on £1.5m, the business is only taxed on £1m after the deduction.
With the corporation tax rate at 25 per cent, the company would owe £250,000 in tax— which is £125,000 less than if they hadn’t claimed the allowance.
By making use of this tax break, the business frees up significant capital, which can be reinvested into growth, job creation, or further innovation.
This upfront tax relief can be a game-changer, especially for companies planning significant investments in equipment.
Conditions for applicants
If you are planning to apply, bear in mind that any qualifying expenditure must be made before 30 September 2034.
There are also additional conditions to consider. If the machinery is moved out of the Freeport within five years, the relief will be withdrawn. And if it’s used both inside and outside the Freeport, the tax benefit will need to be adjusted.
This is a potentially lucrative tax break that has the potential to bring in new investment, strengthen local industries, create jobs, and drive growth.
The reality is that tax incentives like this don’t come around often. Plan ahead. Make sure investment qualifies and stays compliant with the rules. Getting professional advice can make all the difference.
If you want to explore how this could benefit your business, the team is here to help. If you want to explore this, reach us at 01463 234445 or email corporate@wjm.co.uk.
The information contained in this newsletter is for general guidance only and represents our understanding of relevant law and practice as at March 2025. Wright, Johnston & Mackenzie LLP cannot be held responsible for any action taken or not taken in reliance upon the contents. Specific advice should be taken on any individual matter. Transmissions to or from our email system and calls to or from our offices may be monitored and/or recorded for regulatory purposes. Authorised and regulated by the Financial Conduct Authority. Registered office: 319 St Vincent Street, Glasgow, G2 5RZ. A limited liability partnership registered in Scotland, number SO 300336.
