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Out-Law News 1 min. read

New enterprise zones to benefit from tax breaks and relaxed planning rules


New Enterprise Zones will be created in England as part of a Government initiative to boost economic growth, the Chancellor has announced.

Manchester Airport is the first of 21 sites, put forward in the 2011 Budget (104-page / 1.1MB PDF), which will benefit from tax incentives and relaxed planning rules.

The Government has promised to invest at least £100m into the new Zones before the next election.

There will initially be 11 sites in specific urban Local Enterprise Partnership (LEP) areas, including Liverpool Waters, high street chemist Boots' campus in Nottingham and London's Royal Docks. LEPs will be encouraged to bid for the remaining 10 sites, with a view to the new Zones being chosen by July.

The devolved administrations in Northern Ireland, Scotland and Wales are being encouraged to consider similar regimes.

Enterprise Zones were a key part of urban regeneration in the 1980s and '90s, however 100% capital allowances for construction costs – a key feature of the old regime – will not be available.

The new Zone incentives focus on property occupiers rather than property owners, offering 100% business rates relief worth up to £275,000 over the first five years. Certain Zones will also benefit from 100% plant and machinery allowances, in areas where there is "a strong focus on high value manufacturing", according to the Budget.

"The new Enterprise Zones appear to be rather different from the creatures of the 1980s and 90s. Tax relief is not centre stage and it remains to be seen whether business rates and planning relaxations will be enough to drive growth," said Ian Hyde, tax expert at Pinsent Masons, the law firm behind OUT-LAW.COM.

The new Zones will also benefit from simplified planning restrictions, public funding and Government-supported superfast broadband.

Local authorities will be allowed to keep increased business rates generated by the new Zones for at least the next 25 years. Proposed Tax Increment Financing (TIF) arrangements will allow authorities to ringfence those funds to borrow against for development costs.

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