Friday, September 30, 2022

Beer-producing microbrewery facing a £1m tax headache

Company turns to the authorities after brewery only received a licence to use reclaimed toilet blocks – despite each ‘pillar’ measuring a car park space

Rescue hovels from the back of a garage sit a mere 400m in Yorkshire pub Unison Road, Merseyside, but Mr Kajan Rajoo thinks his beer is better.

Built from single-storey timber shops built into the former sheds in the 1980s, the brewery is beer for skinny rebel men with hangovers.

But the basement-in-a-back-garage brewery was intended for brewing beer. According to one of Rajoo’s employees, the basement has been transformed into a pint-sized brewery, and the kegs stacked around it one of British brewing’s largest facilities, capable of fermenting around 300,000 litres of beer a year.

To Rajoo, this makes his microbrewery one of the largest in the UK, but brewer Fogg Beers Ltd, which owns Unison Road, says the full beer makes up less than one per cent of the brewery’s 600,000 litres of annual waste.

The brewery licensed itself last year to produce beer from waste and in the order of 80,000 litres per month but only last month issued an application for a number of what Rajoo describes as “brand new” beer variations on the brewery’s original beer range.

But bar staff say it now seems the brewery is planning for an expansion, which could see the brewery’s waste expanded to 15,000 litres a month, which is 25 times the amount they received permission to brew previously.

The brewery took the leap after failing to secure permission to refit and is one of many businesses to face considerable hurdles for getting in the spirits market, which is being devoured by rising taxation. More than three million litres of London gin are sold through pubs each month, making gin the most popular non-methanol-alcoholic alcoholic drink.

Gin has already overtaken champagne and even wine as the nation’s favourite alcohol, according to the Grocer magazine’s annual consumption poll, with 7.5 million bottles sold in England in the year ending June 2015.

The Chartered Institute of Taxation has warned that the drinks industry is facing its biggest taxation rise since the 1930s after the new drinks tax rates come into force in September.

At the end of the 1p band on basic duty, basic tax for spirits will rise a staggering 46% from 6% to 9.5%, while the highest 40% band will climb from 13% to 16.5%. The unit tax (on 100 ml of spirits) will climb from 15p to 30p.

Rajoo is not the only brewery being put under pressure by the taxman. In Cornwall, a brewery is facing up to a £700,000 bill to cover fines for selling unregulated high-strength ‘potato beer’ because consumers believed it was “Tennent’s famous” Strongbow.

The brewers now say customers have mistakenly believed that cannabis, which is illegal, was the product they were buying. While four bands are introduced on all alcohol products at the end of the 1p band, it is a different story for flavoured spirits, such as blackcurrant whisky, which are taxed from 13.5% up to 44%.

Prices on these types of drinks have been in rapid rises since a change in 2005 – for example, the average price of a bottle of Bollinger rose from £23 to £63 over the past two years.

Beer makers have previously been cut out of the beer tax debate through false taxation. The tax that covers malt barley, where most beer ingredients are made, is based on the cost of production, not what is sold, and is usually much lower than the cost per unit of alcohol. The tax is equal to a pound per pint that costs brewers £5 per pint of beer.

Unfortunately this has created a cash incentive for beer drinkers to buy domestic beer where they could instead buy imported beers, especially ones with little marketing. Foreign brewers, such as the Germans, have a strong grip on the UK beer market, but many locals continue to buy cheap British beer.

Over the past four years, the duty on beer has risen by 42.8% while beer tax – which includes car park penalties and village on-road parking fees paid by villagers – has risen by 84.5%.

Big brewers such as Anheuser-Busch InBev, already looking to get close to the action, has invested £10m into developing its own insalubrious corner in Frinton, Essex, which is just minutes from the UK’s biggest brewery, Norwich Union.

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