Foyle MP Mark Durkan’s second new monthly column for the Derry Journal, focuses on the need to challenge proposed HMRC regulations which could jeopardise major plans by local firm Niche Drinks to invest in the building of a state-of-the-art new £10m whiskey distillery in the city, creating much needed employment.
Originally St. Brendan’s Irish Cream Liqueurs Co., the Waterside-based firm are own label suppliers to Marks & Spencer, Tesco, ASDA, Sainsbury and ALDI. 99% of their production is sold outside Ireland and 40% outside the EU. Exporting to 25 markets worldwide, they have won a Queen’s Award for Export Achievement alongside various supplier awards.
A quiet local success story, Niche Drinks – in terms of wages (75 jobs) and local sourcing (including 25% of all milk produced in the north-west) – contributes £4m to our local economy. In Duty Corporation Tax and PAYE they paid over £8m last year.
They have also brought forward real prospects in terms of investment and expansion – announcing in June that they would be investing £10m in a new state-of-the-art whiskey distillery in the city. But along with comparable drinks producers throughout the UK they are also facing real problems with new duty guidelines from HMRC which appear to be driven by the European Commission’s excessive interpretation of a 2009 European Court of Justice ruling – the Siebrand judgement.
All alcoholic drinks are subject to taxation or duty, a lower rate or classification of 22.06 for products made with wine/ spirit blends and taxed as such by HMRC (as opposed to the higher 22.08 rate for pure spirits). Niche Drinks has been making 22.06 or ‘Intermediate Products’ as they are called since 1993.
However, in recent months HMRC have released a new draft Notice 163 (which means taxation at the pure spirits or higher 22.08 rate) that they claim is necessary to comply with the Siebrand judgement.
The duty uncertainty now created by HMRC (apparently to satisfy the EU Commission) has serious implications for this successful local manufacturer which exports strongly, innovates and has been planning new investment with potential to create new jobs.
The serious business challenge this entails is not just a marginal taxation rate issue. Uncertainty now created about current and future classification decisions affects firms’ key commercial ability to fix prices for various retail channels.
The impact on the sector’s confidence will stifle innovation, stall investment, and ultimately cost jobs in Derry and elsewhere if regulations are implemented in line with the new draft Notice 163.
Along with other concerned MPs from different parts and parties, I am now looking to the Treasury to see common sense - sense which seems to have been lost in the logic black hole of Customs and European Commission stipulations.
I have discussed the concerns of Niche Drinks with George Osborne and (Chief Secretary to the Treasury) Danny Alexander, but at the Prime Minister’s request, I wrote to the Chancellor setting out the case more fully. Following my recent reply from the Treasury Minister responsible for this policy area – Sajid Javid – it is clear that there needs to be more engagement between Customs and the industry – and importantly a stronger line coming from Treasury Ministers regarding the European tariff classification.
I have also identified a number of British MPs who have firms similarly affected and have now encouraged them to lobby in the same terms and join any formal delegation which might need to press these important points.
As Derry’s MP, I will be doing everything possible to support our indigenous industry, encourage exports and sustain jobs. That is why I have to respond to the worries and concerns of such a forward-looking, sell-to-the-world local firm.