Revenue & Customs Brief 09/12

Revenue & Customs Brief 09/12

Excise duty: Changes to use of red diesel in private pleasure craft

Purpose of this brief

This brief gives information about changes to the procedures for the use of red diesel in private pleasure craft from 1 April 2012.

From 1 April 2012 legislation will make clear that the use of red diesel with full duty paid for propelling private pleasure craft is permitted under UK national legislation within UK waters. When red diesel is used outside UK waters it will be subject to any prohibitions and restrictions that apply in the waters of the Member State or country in whose waters it is used.

Who needs to read this?

Registered Dealers in Controlled Oils (RDCOs) who supply red diesel for private pleasure craft and private pleasure craft users.

Background

At the end of 2006 a UK derogation to the Energy Products Directive, permitting the use of rebated red diesel as fuel for propelling private pleasure craft expired and such fuel became subject to the full rate of duty.

A consultation exercise on options for implementing the new requirements resulted in overwhelming support from boat users and suppliers for the retention of red diesel. The reasons included the cost to suppliers and likely subsequent supply problems of installing a second supply stream if a switch to white was required and the fact that red diesel could continue to be used for domestic purposes on board at the rebated rate.

In November 2008 new procedures were introduced to allow the use of red diesel to propel private pleasure craft on condition that full duty is paid.

The European Commission has challenged the UK practice, maintaining that it contravenes the fiscal marking directive (95/60/EC) and that it makes it difficult for other Member States to control the improper use of marked oils, as marking usually indicates that the oil bears a rebated rate of excise duty. The changes being introduced aim to take account of the European Commission's concerns and minimise the risk of a successful legal challenge.

The changes clarify that the use of full duty paid red diesel for propelling private pleasure craft as permitted under UK legislation applies only to UK waters. This does not affect any prohibitions and restrictions that apply outside UK waters, including any prohibitions and restrictions under the law of another Member State which apply within the territorial waters of that Member State.

Informal consultation with a number of representative organisations has emphasised the importance to both suppliers and users of the continued use of red diesel rather than the use of white diesel.

What are the changes?

Under the current arrangements any person purchasing red diesel for a private pleasure craft must make a declaration at the time of purchase of the proportion of fuel being used for propulsion purposes.

From 1 April 2012 the declaration will change to include an acknowledgement that the use of full duty paid red diesel to propel private pleasure craft is a UK procedure applicable to UK territorial waters under UK national legislation. Users must be aware that if full duty paid red diesel is used to propel pleasure craft within the territorial waters of another Member State they will be subject to the national legislation and consequently any prohibitions and restrictions of that Member State.

What is the declaration?

The wording of the required declaration is:

I declare that [ ]% of the fuel purchased will be used for propelling a private pleasure craft.

I am aware that the Hydrocarbon Oil Duties Act 1979, which permits the use of marked diesel to propel private pleasure craft, only applies within UK waters. I acknowledge that nothing in that Act, or the making of this declaration, affects any restrictions or prohibitions that may apply to the use of fuel for propelling private pleasure craft outside UK waters, including any restrictions or prohibitions under the law of another Member State that apply within the waters of that Member State.

Suppliers' responsibilities

Under the current procedures suppliers must retain a copy of the declaration in their records and this continues to be the case. There is no standard form for the declaration and suppliers should incorporate the declaration into their records in the most appropriate way.

There are no other changes to suppliers' obligations.

Purchasers' responsibilities

It remains the purchaser's responsibility to declare the proportion of fuel used for propelling the craft, and sign and date the declaration.

Purchasers are currently advised to retain evidence that they have made a declaration and paid duty on the fuel used for propulsion, in order to facilitate any checks that HMRC or the relevant authorities in other Member States wish to make. This continues to be the advice.

Timing

These changes come into effect on 1 April 2012. However, HMRC recognizes that where, for example, suppliers have the declaration incorporated into pre-printed stationery, it may take suppliers some time to reflect the changes fully.

Notice 554 - Fuel used in private pleasure craft and for private pleasure flying will be amended.

Issued: 21 March 2012