September budget: New investment zones

Following Chancellor, Kwasi Kwarteng’s budget announcement in September of the government’s new Investment Zones initiative, the Department for Levelling Up, Housing and Communities (DLUHC) and HM Treasury (HMT) has issued a guidance document.

Reiterating its position that Investment Zones will accelerate the housing and infrastructure needed to drive economic growth, the government says it “will cut back unnecessary bureaucratic requirements and processes and red tape that slows down development, cut taxes to back business, and, as a result, attract new investment to create jobs.”

The overriding purpose is that Investment Zones will get the United Kingdom “working, building and growing, and get spades in the ground”.

Located throughout the country, investment zones are intended to stimulate and accelerate economic growth through a streamlined planning process and variety of tax incentives and the government is set to reveal more detail in autumn.

In the meantime, here is what we do know:

• The government is currently in discussions with 38 local and mayoral combined authority areas in England including Lancashire, Liverpool and Greater Manchester.
• Investment Zones will be chosen following a rapid Expression of Interest process which is open to everyone, and after local consent is confirmed.
• Described as “hubs for growth”, the Government says each Investment Zone will offer “generous, targeted and time-limited tax cuts for businesses, backing them to increase productivity and create new jobs”.
• Of particular interest to the home building industry, these areas will also benefit from further liberalised planning rules to release more land for housing and commercial development, and reforms to increase the speed of delivering development.

What might the tax benefits be?

Specified sites in England will benefit from a range of time-limited tax incentives over 10 years. Tax incentives currently under consideration include:

• 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.
• 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.

Designated development sites to speed up development            

It’s proposed that there will be designated development sites to deliver growth and housing.

The government says it wants to do “everything possible to streamline and accelerate delivery of high-quality development for jobs and homes. When proposals come forward for Investment Zones, they will benefit from a liberalised planning process.”

For developments in the early stages of planning, and to encourage new development to come forward, there will be a new faster and more streamlined consent to grant planning permission.

This consent is expected to reduce many of the burdensome requirements which has made the planning of large sites slower and more complex, to enable developers to bring forward “good quality development which responds to the market.” In particular, government will:

• remove burdensome EU requirements which create paperwork and stall development but do not necessarily protect the environment;
• focus developer contributions on essential infrastructure requirements;
• reduce lengthy consultation with statutory bodies; and
• relax key national and local policy requirements.

Key planning policies to ensure developments are well designed, maintain national policy on the Green Belt, protect heritage, and address flood risk, highway and other public safety matters – along with building regulations – will still apply.

What about the Freeports programme?

The government remains committed to the progress of the Freeports programme and will work with local partners involved in current and prospective Freeports to consider whether and how the Investment Zones offer can help to support their objectives, as part of the wider process for identifying Investment Zones. This will ensure that both programmes complement one another.

What’s next?

The government recognises that further detail is required on provisions and mechanisms for delivery, but it will work with local authorities and mayoral combined authorities to come up with a list of Investment Zones. These areas will be selected based on their potential economic growth and capacity to bring forward land for development.

The Government has also committed to working in partnership with Devolved Administrations and local partners in Scotland, Wales and Northern Ireland to deliver Investment Zones.