27 October 2010

                            CONSTRUCTION COSTS SET TO INCREASE

That’s the message from suppliers of stone, concrete products and road surfacing materials following the suspension of a tax rebate on the quarrying of stone in Northern Ireland. 

The UK Treasury has announced the suspension of the rebate as a result of a EU General Court decision on September 9th past which identified certain aspects of the EU Commissions 2004 decision that granted the rebate to Northern Ireland was incompatible with EU state aid rules. The suspension means that from the 1st December 2010 every £1 spent on construction activities in Northern Ireland will not go as far. It will see a 40% increase in stone prices, a 10% increase in Concrete and a 15% increase in road surfacing materials. Also if the rebate is not reinstated as soon as possible it will mean an additional cost to the Northern Ireland Executive of some £25 million per year for construction projects in Northern Ireland. Anyone building or buying a house will pay more.

The increased costs will also make quarrying companies, particularly within 20 miles of the border which is covers 75% of Northern Ireland, uncompetitive with companies in the Republic of Ireland where there is no similar tax on stone. It will also mean that companies who are tied into existing supply contracts in which they cannot pass on the additional tax will be facing financial loss. There is no doubt that this will impact on jobs within the quarrying industry and the wider construction industry.

The Regional Director of the Quarry Products Association of Northern Ireland, Gordon Best, said “this is a devastating blow not only for the quarry products industry and the construction industry but also for the rural economy where many jobs depend on the quarry products sector. The current scheme that facilitates the tax rebate was due to come to an end on March 31st 2011 and we had been working with the Treasury and the EU Commission to develop a replacement that would last from 2011 to 2021. We wanted to see the end of the existing scheme coincide with the introduction of the new one. That is not to be. However, we will now focus our attention on working with our MEPs, MLAs and the Department of Finance to ensure that the legitimate industry is protected from illegal operators and untaxed imports. We also will be pressing the Treasury and the EU Commission to work effectively and quickly to have the new scheme and rebate introduced as quickly as possible so that the negative impact on the industry and the economy can be kept to a minimum”.

ENDS

Notes for editor:

• The Quarry Products Association NI represents approximately 95% of companies involved in the supply of quarry products to the Construction Industry in Northern Ireland. Our Association draws its membership from companies engaged in providing primary aggregates, the processing of recycled and secondary materials, the production of downstream products such as asphalt, lime mortar, ready-mixed concrete, precast concrete and road surfacing contracting. The Quarry Products Sector employs over 3800 people across Northern Ireland and has a turnover of some £600 million.

• When the aggregates levy was originally introduced it was soon clear to Government that the industry in N Ireland was suffering badly because of the sale of untaxed aggregates from the Republic in N Ireland. Due to the location of potential aggregates suppliers in the Republic and the ability of these suppliers to penetrate into a large geographical proportion of N Ireland given the original tax advantage of £1.60 per tonne, the N Ireland industry suffered particularly as a result of the levy introduction. In theory aggregates imports into N Ireland should be taxed but in practice it was apparent much were not. (Value added products manufactured in the Republic can of course be delivered into N Ireland without any aggregates levy liability, providing suppliers in the Republic with a significant market advantage.)

• HM Revenue and Customs (HMRC) clearly cannot charge the levy at the site of origin of aggregates suppliers in the Republic, and therefore the tax point switches to the concrete/mortar/asphalt plant to which the aggregates are supplied in the North or to the construction site in the North to which the imported aggregates are delivered. Not surprisingly it has proved difficult to identify and collect levy revenues from these potential revenue points in N Ireland with the issue being compounded by the significant cross border smuggling of other higher value products into N Ireland, making the monitoring of aggregates imports very difficult for HMRC.

• As a result QPANI, the Government of N Ireland and HMRC designed the relief scheme whereby aggregates businesses in N Ireland could claim an 80% levy relief if they entered into and complied with negotiated agreements with Government committing them to a programme of environmental improvements for the duration of the relief. The fact that companies in N Ireland participating in the relief scheme would incur environmental costs associated with the scheme which would not be incurred by companies in the Republic exporting into the North was a contributing factor in the original EC approval for the relief scheme. In effect the existence of unfair untaxed competition from the Republic and the environmental incentives and benefits associated with the relief scheme were regarded by the Commission as sufficient reason to allow N Ireland companies pay a lower rate of levy than the full rate which should be charged on imported aggregates. 

For further information please go to www.qpani.org or contact Gordon Best, Regional Director, Quarry Products Association, Nutts Corner Business Park, Crumlin BT29 4SR Tel 02890824078 Fax 028 90825103 email info@qpani.org  mobile 07876 136929

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