Investment zones - A drive for growth or simply tax benefits for relocation?

As part of his mini-Budget the Chancellor announced the intention to create investment zones throughout England.

Business in designated areas within the investment zones will benefit from:

• 100% business rates relief on newly occupied and expanded premises
• Full stamp duty land tax relief on land bought for commercial or residential development
• 0% rate for Employer National Insurance contributions on new employee earnings up to £50,270 per year
• 100% first year enhanced capital allowance relief for plant and machinery used within designated sites
• accelerated Structures and Buildings Allowance relief of 20% per year, thus achieving full tax relief on the cost of newly constructed buildings within 5 years rather than the normal rate of relief of 33.3 years

These tax incentives will apply over a 10-year period.

The Government are in consultation with local authorities to agree the siting of the investment zones. The local authorities involved include Cumbria County Council, Greater Manchester Combined Authority; Lancashire County Council, North of Tyne Combined Authority, North Yorkshire County Council, Sunderland City Council; South Yorkshire Combined Authority, Tees Valley Combined Authority and West Yorkshire Combined Authority.

The Government intend to work with the devolved authorities in Scotland, Wales and Northern Ireland to create investment zones there too.

The intention of the investment zones tax offer is to encourage investment and new economic activity, supporting growth and jobs. However, an unintended consequence may be that businesses located outside of the newly created investment zones will simply relocate into the zone to access the tax benefits etc without providing growth.