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Spring Budget 2023: Investment Zones | accountingweb

Investment Zones make a welcome return


It is hoped that the 12 new Investment Zones announced in the Budget will stimulate economic investment activity in the UK.

15th Mar 2023
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One of the few positive measures that was announced in Kwasi Kwarteng’s much-derided mini-Budget was the proposed establishment of a series of Investment Zones throughout the UK. It was welcome then that Chancellor Jeremy Hunt in his Spring Budget recognised the value of such zones in stimulating investment and growth, and announced the establishment of 12 new Investment Zones.

There will be eight zones in England in the following areas:

• the proposed East Midlands Mayoral Combined County Authority 

• Greater Manchester Mayoral Combined Authority 

• Liverpool City Region Mayoral Combined Authority 

• the proposed North East Mayoral Combined Authority 

• South Yorkshire Mayoral Combined Authority 

• Tees Valley Mayoral Combined Authority 

• West Midlands Mayoral Combined Authority 

• West Yorkshire Mayoral Combined Authority.

At least one further zone will also be available in each of the devolved administrations and the Department for Levelling Up Housing and Communities (DLUHC) is working closely with them to establish how Investment Zones in Scotland, Wales and Northern Ireland will be delivered. The final design choices and agreement on an Investment Zone in Northern Ireland will be subject to the restoration of the Northern Ireland Executive.

Knowledge-intensive growth clusters

The Chancellor announced that each Investment Zone had been specifically targeted toward knowledge-intensive growth clusters. Each cluster will drive the growth of at least one of the Government’s key future sectors – green industries, digital technologies, life sciences, creative industries and advanced manufacturing – bringing investment into areas that have underperformed economically.

The English Investment Zones will have access to a series of measures worth £80m over five years with a tax offer to match those of Freeports. Local government and research institutes will be able to tailor investment plans to their local circumstances. 

Measures will include the availability of enhanced rates of capital allowance, structures and buildings allowance, and relief from stamp duty land tax, business rates and employer national insurance contributions. Alongside this, Investment Zones will have access to flexible grant funding to support skills and incentivise apprenticeships, provide specialist business support and improve local infrastructure, dependent on local requirements. Local partners will be able to choose the number and size of tax sites, within the £80m envelope, up to a maximum of three sites totalling 600 hectares. The amount of grant funding will depend on the number and size of tax sites.

Net zero targets

Plans will be developed collaboratively by central government and Mayoral Combined Authorities (MCAs) working in partnership with local universities, councils and businesses. They will need to demonstrate how the Investment Zone will support the UK reaching net zero by 2050, the government’s new long-term targets to protect and enhance the natural environment and be resilient to the effects of climate change.

These precise and targeted Investment Zones are a welcome initiative, particularly when viewed in the wider context of the full expensing measures announced in the Spring Budget and made available to all companies investing in new plant and machinery. This is one of the most favourable packages of measures ever made available to UK corporates to encourage investment and growth and their introduction should significantly stimulate economic investment activity in the UK.

PracticeWEB 2023 Budget Report Covers

Replies (3)

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By ireallyshouldknowthisbut
15th Mar 2023 17:29

I disagree about them being welcome, or indeed useful. All investment zones have done historically is (a) enrich land owners in the lucky zone, and (b) shift economic activity into the lower tax area.

There is considerable empirical evidence to back this up.

I fail to see why it would be any different thingtime around. Indeed with the 100% CA's for all businesses, then what break exactly can these zones really offer to top that? You might get some limited "buzz" but fundamentally business form and do well as they have a good business plan, not good tax breaks.

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Replying to ireallyshouldknowthisbut:
By Dib
15th Mar 2023 19:10

If you are talking about 100% CAs means this new fully expensing malarky then nope!

The fully expensing is going to be restricted to corporates and only applies to main pool assets which are new and not second hand, not for leasing, not cars, etc. - you see where I am going with this...

...It's a FYA.

OK we still have AIA at a million quid which should be sufficient for most businesses and applies to main pool and special rate pool additions (but not cars) so one question is, who is going to benefit from the 'fully' expensing thingy? Very large companies who spend in excess of £1m on main pool assets per annum and nobody else!

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paddle steamer
20th Mar 2023 10:33

What is the £80m over 5 years for England reference?

Is this the total HMG investment/input into these?

If so then frankly it is so insignificant it is hardly worth bothering about.

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