One of the most abundant elements in the universe, hydrogen, has strong policy support as a key part of the UK’s transition to a net zero future.

Elizabeth Small

Elizabeth Small

Hydrogen certainly can be ‘green’ when electricity from clean renewable sources is used to split water into its constituent elements.

Given that hydrogen is favoured as a clean fuel for both maritime and road freight, port-based locations for hydrogen hubs have a strong logic. Port-based industries also serve the government’s ambitions to become exporters of hydrogen and related technologies.

Freeports, in particular, make attractive locations for manufacturing or siting a new generation of competitive and scalable electrolysers producing that green hydrogen.

Stamp duty land tax should not be payable on the purchase of a site that is entirely within the freeport designated area and is intended for an industrial purpose, such as building a hydrogen factory.

There are enhanced structural building allowances, with a straight line 10% per year deduction on qualifying expenditure on the construction of the new factory, as opposed to the normal 3%.

Manufacturers also benefit from enhanced plant and machinery allowances of 100% for qualifying capex incurred by companies, rather than the normal 18% writing-down allowance on mainstream plant and machinery and 6% on long-life assets and integral features on the kit inside the new factory.

Companies operating in the freeport’s designated tax sites have two further advantages. An employer has National Insurance Contribution savings, although this only applies to new employees with earnings of up to £25,000 a year and may only be claimed for these qualifying employees for three years. The second is a 100% exemption from business rates.

If the freeport status does its job of creating a dynamic high-growth cluster, there is a happy side effect in the attraction of the many experts, investors and innovative businesses that will be vital to the hydrogen ecosystem.

Elizabeth Small is a corporate tax partner at law firm Forsters