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Keeping freeport opportunities on the horizon

Winning bid announcement for Inverness and Cromarty Firth (ICF) Green Freeport.

Laura Petrie, partner at Brodies LLP, discusses the establishment of the ICF Green Foreport and its effects.

Laura Petrie, partner at Brodies LLP, discusses the establishment of the ICF Green Freeport and its effects.

The winning bid announcement for Inverness and Cromarty Firth (ICF) Green Freeport has been a fantastic boost to the Highlands’ strategic development strategy as well as welcome news to many local industries, in particular, the offshore energy market. Located at almost exactly the midway point along the ‘energy corridor’ of the north-east of Scotland (spanning from Wick all the way down to Dundee) the opportunities presented by the establishment of the ICF Green Freeport will be significant.

Trading Freely

The establishment of a ‘free trading zone’ means that port operators and companies operating within that zone are able to defer tax duty and import VAT on goods as well as other employee related contribution deductions. This will allow for advanced manufacturing of technologies for the energy industry, including offshore wind, hydrogen production, oil and gas decarbonisation, while also offering tax and customs incentives. The development of technology and the financial benefits of the freeport status will help to attract investment to both the energy industry and the local area as well as providing a boost to the local job market and opportunities to the wider supply chain located in the area.

It is anticipated that it will take around twelve months for the regulatory arrangements surrounding the operation of ICF Green Freeport to be finalised, and a further twelve to eighteen months thereafter for the full development of the ICF Green Freeport to be conducted. While this might seem to be a lengthy wait, there are plenty of actions that companies who ultimately wish to use the ICF Green Freeport should be considering now, in order to be ready for the ICF Green Freeport going live.

Freeport benefits

There are multiple ways access to a Freeport can benefit a variety of organisations and business, whether in the energy industry or not. Access to the tax benefits of operating import, manufacture and export activities within the free trade zone can provide significant cost efficiencies to business that require to import large quantities of raw materials (such as steel or concrete) to manufacture items that will never be utilised within the onshore UK market. Similarly, organisations can benefit from the application of differing tax rates if the raw materials are manufactured into different goods within the free trade zone, before being ‘exported’ from the free trade zone into the UK. The full potential in this area is yet to be determined until the regulations are finalised but these principles are inherent in other freeports across the globe so will likely be followed within the UK regime.

For now, businesses that would want to use the ICF Green Freeport for manufacturing capability should be considering how operating within a free trade zone would impact on their tax position and whether their manufacturing operations could be relocated to within the free trade zone.

For those companies operating within the supply chain servicing the offshore energy industry, establishing a place of business within the free trade zone may be a consideration. The ability to pass on cost-efficiencies to customers can provide a competitive advantage. Furthermore, it is anticipated that the taxation regulations will provide that where employees spend at least sixty percent of their time working within the free trade zone created by the ICF Green Freeport relief on national insurance contributions will be available. In order to ensure that all employees benefit and no business is placed at a disadvantage, the ICF Green Freeport is intending to reinvest the NIC reliefs into a training and skills development fund with the intention of improving the skills base of local people and encourage inward investment into the region.

Accordingly, assessment of relocation to within the free trade zone should be considered (including all the likely cost implications of obtaining property or construction that may be required) as well as whether employees can be moved into the free trade zone under current contracting arrangements (i.e. can their place of work be dictated by the employer).

Advance preparation

In addition to the general consideration around whether operating within the ICF Green Freeport will be beneficial, consideration should be given to the other benefits a local freeport might create. Increased investment in the area will result in increased footfall and accommodation requirements – either for a company’s own workforce or in the provision of accommodation, both temporary and permanent.

Industries outwith the energy market but involved with energy services may also wish to consider if they want to become involved in business centred around the ICF Green Freeport.  Plans have already been proposed for the creation of a green hydrogen plant in the area which has been welcomed by local distilleries but the development, construction and subsequent operation of that site provides significant opportunities for the supply chain and also offers scope for new property development in the area to benefit from the energy produced.

Businesses interested in the ICF Green Freeport should also use the time between the award to the likely readiness of the free port to conduct various commercial health checks. Reviewing policies and procedures and standard contract terms to ensure they are compliant with all current regulations, as well as preparing free trade zone specific versions, will ensure businesses are ready to align with the formal opening of access to the freeport.

Green for go

The ICF Green Freeport is a significant long-term investment in the Highland region which will have wider implications across Scotland and throughout the energy industry. This should be a green light for businesses that want to engage in the freeport and the opportunities it brings to start planning and preparation now so that they are ready to go when the ICF Green Freeport goes live.


Laura Petrie is a partner at Brodies LLP. Learn more about Brodies LLP today.