Freeports and Investment Zones: Land Use for Tax Relief Eligibility Explained

Freeports and Investment Zones SDLT Relief: Qualifying Use of Land

For Freeports and Investment Zones SDLT relief, it is not enough that land is in the right area. The land must also be used in a qualifying commercial way after purchase. This can include the buyer’s own business use, development for later commercial use, or commercial letting to earn rent or other income.

• Land can qualify if the purchaser or a connected person uses it in a commercial trade or profession, including a property rental business.
• Relief can also apply where the land is being developed or redeveloped for later use in a commercial trade or profession, even if someone else will eventually occupy it.
• Commercial investment structures may qualify if the land is exploited as a source of rents or other receipts, provided the income is not classed as excluded rents.
• Mixed use can still qualify, for example where part of the land is used for a trade and part is let out commercially.
• The facts are important, especially where ownership, development and occupation are split between different parties or where the intended use may change over time.

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Freeports and Investment Zones relief: when land is used in a “qualifying manner”

This page explains one of the core conditions for Freeports and Investment Zones SDLT relief: the land must be used in a “qualifying manner”. The rule matters because relief does not depend only on where the land is. It also depends on how the land will actually be used after purchase.

What this rule is about

Freeports and Investment Zones relief is aimed at land that will support genuine commercial activity. The official rule sets out the kinds of use that count as “qualifying use” for this purpose.

The focus is not limited to the purchaser personally occupying the land. The rule is broader than that. It can cover land used in a trade or profession, land being developed for that kind of use, and land held commercially to produce rents or other receipts. It can also cover mixed use where more than one of those activities is present.

This means the key question is usually not simply “what has been bought?” but “what commercial use will the land be put to, and by whom?”

What the official source says

The HMRC manual says that land is used in a qualifying manner if one or more of the following applies:

• the purchaser or a connected person uses it in the course of a commercial trade or profession;
• the purchaser or a connected person develops or redevelops it for use by any person in the course of a commercial trade or profession;
• the purchaser or a connected person exploits it, in the course of a commercial trade or profession, as a source of rents or other receipts, excluding “excluded rents”;
• the land is used in two or more of those ways.

The manual also states that use in the course of a trade or profession includes use in the course of a property rental business.

Importantly, the person who ultimately uses the land does not always have to be the purchaser. HMRC gives the example of a factory bought by A for use by B, where B is not connected with A. Relief can still apply if B pays rent to A.

The manual also notes that land whose use is ancillary to qualifying land may itself qualify, but that point is dealt with separately.

What this means in practice

In practice, this rule allows relief in several common commercial structures.

First, it covers owner-occupation. If a business buys land and uses it for its own commercial trade or profession, that is the most straightforward case.

Second, it covers development activity. A purchaser can qualify even if the land is not yet in commercial use, provided the purchaser or a connected person is developing or redeveloping it for later commercial use.

Third, it covers investment and letting structures. A purchaser does not have to carry on the trading activity on the land itself. If the land is commercially exploited as a source of rents or other receipts, that can still be qualifying use, subject to the exclusion for “excluded rents”.

Fourth, the rule recognises that commercial land can be used in more than one way at the same time. For example, part may be occupied for a trade and part let out commercially.

The manual also makes clear that a property rental business can count as use in the course of a trade or profession for this purpose. That is important because many commercial landowners hold property through letting businesses rather than operating from the land themselves.

How to analyse it

A sensible way to analyse the condition is to ask these questions:

• Who will be using or exploiting the land after completion: the purchaser, a connected person, or someone else?
• Is the relevant activity being carried on in the course of a commercial trade or profession?
• Is the land already in qualifying use, or is it being developed or redeveloped for that use?
• If the purchaser will not occupy the land, will it be exploited commercially as a source of rents or other receipts?
• Do any receipts fall within the category of “excluded rents”, which would prevent that limb from applying?
• Is part of the land only ancillary to other land that is in qualifying use?

It is also important to separate three different ideas:

• use by the purchaser or a connected person in a commercial trade or profession;
• development for later commercial use, even by someone else;
• commercial exploitation of the land to generate income.

A transaction may fit one of these categories even if it does not fit the others.

Example

A company buys a site in a designated tax area and constructs industrial units on it. It does not intend to run its own manufacturing business there. Instead, it will let the units to unrelated trading businesses at market rent.

On the manual’s approach, this can still fall within qualifying use. During the build phase, the land may qualify because it is being developed for use in the course of a commercial trade or profession. Once completed, the land may also qualify because it is being exploited commercially as a source of rents, assuming the rents are not “excluded rents”.

Why this can be difficult in practice

The wording is broad, but applying it can still be fact-sensitive.

One difficulty is identifying the real commercial use where there is a layered structure. The purchaser may be an investor, a group company, or a development vehicle, while the occupier is someone else. The manual supports relief in some of those situations, but the exact facts still matter.

Another difficulty is the boundary between ordinary commercial rents and “excluded rents”. The source page refers to excluded rents but does not explain them. That means this page alone is not enough to decide every letting arrangement.

A further issue is timing. The rule covers both current use and development for future use, but in practice the intended use must be real and supportable. Where land is bought with mixed or changing intentions, the analysis may be less straightforward.

There can also be judgement involved in deciding whether land is genuinely used in the course of a commercial trade or profession, especially where the activity is indirect, limited, or only part of a wider site.

Key takeaways

• Qualifying use is not limited to the purchaser’s own occupation; it can include development and commercial letting structures.
• Use in the course of a property rental business can count as use in the course of a trade or profession for this relief.
• The exact facts matter, especially where another person will occupy the land or where rental income may include “excluded rents”.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Freeports and Investment Zones: Land Use for Tax Relief Eligibility Explained

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