Latest on Red Diesel

[blackrose]

Please find here a joint communication from The Inland Waterways Association, Royal Yachting Association and British Marine Federation released today (12/9/2008), concerning how the end of the derogation on Red Diesel will be implemented and the arrangements for users making declarations at point of sale.

 

Red Diesel update

12 September 2008

 

The BMF, RYA and IWA are pleased to provide an update on how the end of the derogation will be implemented as of 1 November 2008.

 

Introduction

 

We have been working closely with HM Revenue & Customs since early 2007 to produce a pragmatic and sensible solution to the implementation of the end of the derogation. Prior to that, from 2003, we successfully lobbied Government to seek the retention of the derogation but this was rejected by the European Commission in favour of its tax harmonisation agenda.

 

Once it was confirmed that the derogation had to come to an end, our key concerns were to:

 

* Secure the continued availability of diesel at the waterside

* Minimise the impact on the boater and industry

* Avoid safety and environmental implications of transporting fuel by hand

 

In February of this year, when HMRC published its outline proposals, we were pleased to see that our efforts had succeeded and that all of these concerns had been taken into account, particularly by allowing recreational boaters to continue to use red diesel. Since then, we have been endeavouring to ensure that the detail of HMRC’s proposals is as simple and as effective as possible.

 

Successful Co-operation

 

The BMF, RYA, IWA and HMRC all agree that it was disappointing that the derogation was not renewed by the European Commission, despite what we all considered to be a very strong case. We also all agreed that the end of the derogation presented considerable difficulties in terms of implementation.

We are very pleased, however, that the BMF, RYA, IWA and HMRC have been able to work together successfully on behalf of the industry and recreational boaters. HMRC has been very receptive to the concerns of suppliers and users and has managed the consultation process well.

 

HMRC Conclusions.

 

HMRC accepted the overwhelming wish of both suppliers and users that red diesel should continue to be available to recreational boaters.

 

* The loss of the derogation will only affect fuel used for propulsion, which will be subject to the full rate of duty.

* Red diesel at the rebated rate will continue to be available for domestic purposes, such as heating and lighting.

 

How will it work?

 

1. When recreational boaters buy diesel for their craft, they will need to make a declaration to the supplier if they intend the fuel to be used for propelling a private pleasure craft.

 

2. The recreational boater will also declare what percentage of the fuel will be used for propulsion (as opposed to domestic purposes such as heating and lighting).

 

How will the boater work out what percentage of fuel they intend to use for propulsion?

 

HMRC has understood our arguments about the potential difficulties for fuel suppliers in calculating duty and VAT – in particular for the smaller operators – when faced with customers claiming different percentages of fuel used for propulsion. HMRC also appreciates the concerns of users about the difficulty of calculating and apportioning their own intended usage accurately and their worries about unintentionally making an inaccurate declaration. However, the EU Energy Products Directive specifically refers to ‘fuel for the purposes of navigation’ (which is reflected in UK law as ‘fuel for propelling’), so there is no legal basis for imposing a single standard apportionment to be applied universally that pays no regard to actual usage for propulsion.

 

HMRC has therefore confirmed to the BMF, RYA, and IWA that their advice on this issue is as follows:

 

Q. What will be the allowance for fuel used on boats for heating and lighting?

 

A. There is no fixed allowance. It is for the purchaser to declare the percentage of fuel used for propulsion. However, analysis by both the industry and HMRC suggests that a split of 60% for propulsion and 40% for domestic use (heating, cooking etc) probably reflects most people’s use and it is therefore likely that many users will declare such an apportionment.

This will make it easier for suppliers (known as Registered Dealers in Controlled Oils) to work out additional duty and VAT. However, where a purchaser knows that their propulsion use may be more or less than the above apportionment split or a craft clearly has no domestic use, then they must declare their actual intended usage.

 

Q. What about residential boat owners where nearly all fuel is for domestic purposes – what can they declare?

 

A. We have recognised the status of residential boat owners whose primary residence is their boat. Some of these will be at fixed moorings or move just a very short distance along the towpath from permanent moorings. If they live aboard the craft permanently and hold certain documentation, such as a Houseboat Licence, Residential Mooring Licence, Council Tax Bill in respect of the mooring, or other peripheral documentation, invoices or bills which provides proof of permanent residency, they may purchase all their fuel at the rebated rate (as if they were a commercial vessel). They will still be required to make and sign a declaration saying that 0% of the fuel is for propelling purposes. It will be the responsibility of the declarant to ensure that they hold the requisite documentation should HMRC wish to check the validity of the declaration made in these circumstances. Continuous cruisers may not declare 0% under these arrangements, even if they reside permanently on their craft, they must declare their actual intended usage for propulsion.

 

Registered Dealers in Controlled Oils (RDCO) will need to account to HMRC for the additional duty received from recreational boaters. RDCOs already owe a general duty of care to ensure that they only make supplies of controlled oil for legitimate uses.

 

Further Information

 

We will continue to work with HMRC to provide support to suppliers and users over the next few months. RYA and IWA will provide guidance to their members and the BMF will offer an information service for industry.

HMRC has confirmed that it will provide supplementary guidance to RDCOs and that its emphasis as the new measures bed in will be to help and advise suppliers and users to get things right.

[Mick_B]

So "Registered Dealers in Controlled Oils" are now to be part time HMRC Police...

[Tim Doran]

Thanks very much for posting this.

 

I can see one potential problem with this system.

Imagine this:

Red coloured diesel at the marina costs £1/ltr and £1.44/ltr (with tax @ 44p)

White diesel at the petrol pump costs £1.20/ltr

 

This would be a quite reasonable as supermarkets have much greater purchasing powers.

 

So the ideal situation would be to purchase the 60% for propulsion from the supermarket at £1.20/ltr and 40% for heating and lighting at £1/ltr at the marina. However the problem is obvious when I roll up to the marina claiming 100% if what I purchase from them is for heating and lighting.

 

The saving on a 150ltr tank is actually only a small one of £21.60 however it is still some extra beer tokens

 

I dont really know how tax systems work but if I kept recipts from both places would that be acceptable?

 

Tim

[David]

Hi

Keeping the receipts must be OK if you got checked, I am aware of several people who are going to go down that route if the cost for red and white are the same let alone cheaper for white simply on the basis of why should they pay the same for a cruder product and if they do mix the two it should make the fuel overall sweeter/better quality.

As usual our goverment has jumped through hoops for the EU, unlike countries across the channel who pay lip service to anything they don't like and do nothing to enforce (ask farmers about british beef, lamb etc and unpaid fines on continental countries).

Even the Irish have done it better (basically aggreed) but as we know they have opted to just let the user keep his receipts and at the end of the year decide if they have used any for propulsion and send all the receits and a cheque for they extra duty. This way the retailer at the pump has no extra work he just notes the boat (or car registration) same as he does now for over 100 Lt just has to do it for all sales, he has no need to ask what it's for, he collects no tax because the tax and vat is already payed by him to the bulk wholesaler when he gets his storage tank filled. The boat owner just buys at the going rebated rate as we do now and as said declares what it's been used for 12 months later.

It's blindingly clear the Irish government will be happy to collect the miniscule cash that gets sent in at no cost and no extra policing and with a galic shrug say to the EU we done what you demanded.

david

[carlt]

As usual our goverment has jumped through hoops for the EU, unlike countries across the channel who pay lip service to anything they don't like and do nothing to enforce (ask farmers about british beef, lamb etc and unpaid fines on continental countries).

The govt hasn't jumped through hoops, for the EU. They have been so incompetent at coming into line with , agreed, regulations that we'll end up, as usual, paying more than anyone else in the EU.

 

If the UK actually came into line with what the EU charges for transport fuel, across the board, then we would be paying less, overall, for our diesel.

 

Personally, having a sea-going boat, I have decided to move my boat to Folkestone and I will be buying my diesel on the European mainland, where it's cheaper.

 

If we were "jumping through EU hoops" why would it be advantageous for me to do this?

 

More Euro-septic nonsense!

[Nine of Hearts]

I like the bit about residential boaters being able to claim 0% for propulsion. Of course, the minute you pull away from the fuelling station to return home, a taxman will leap from the bushes shouting "Ah-ha!". Perhaps.

 

Is this system really going to work like this in reality?

 

"Fill her up please".

"What proportions, sir?"

"10% propulsion, 90% domestic, please"

"Are you sure, sir"

"Oh yes, we don't get out much and they're bloody bright lights in there, you know"....

 

They might as well as left us all on red, as with no tacho readings, how can anyone check?

 

(I strongly suspect that reality is going to be £1.40 at marina pumps, er, that's it).

[blackrose]

So the ideal situation would be to purchase the 60% for propulsion from the supermarket at £1.20/ltr and 40% for heating and lighting at £1/ltr at the marina. However the problem is obvious when I roll up to the marina claiming 100% if what I purchase from them is for heating and lighting.

 

I'm not sure that you could claim that 100% of your purchase from a marina is for heating & lighting because the way I read it, unless you have documents to prove residential status, a supplier is not at liberty to sell you any more than 40% tax-free. They would have no way of knowing how much tax you paid elsewhere so that doesn't really come into it.

[mayalld]

I'm not sure that you could claim that 100% of your purchase from a marina is for heating & lighting because the way I read it, unless you have documents to prove residential status, a supplier is not at liberty to sell you any more than 40% tax-free. They would have no way of knowing how much tax you paid elsewhere so that doesn't really come into it.

 

A supplier is at liberty to sell whatever proportion you declare. If you go beyond 40/60 HMRC may ask you to justify it.

 

If you have separate tanks, you will easily be able to justify 100% when filling the heating tank.

[Nine of Hearts]

If you have separate tanks, you will easily be able to justify 100% when filling the heating tank.

I have separate tanks. A 135 imp gallon one at the back of the boat, and this tobacco tin. Does that count?

[mayalld]

I have separate tanks. A 135 imp gallon one at the back of the boat, and this tobacco tin. Does that count?

 

is the tobacco tin connected to the engine?

is the 613.722404 litre tank connected to the engine?

are there any suspicious looking transfer pumps?

Edited September 16, 2008 by mayalld

[blackrose]

A supplier is at liberty to sell whatever proportion you declare. If you go beyond 40/60 HMRC may ask you to justify it.

 

If you have separate tanks, you will easily be able to justify 100% when filling the heating tank.

 

Even if the supplier is restricted by HMRC from supplying more than 40% tax free without proof of residential status the first place? I thought the 40% maximum figure had been decided on by HMRC and those representing boaters as a simple way to specifically ensure that greater declarations could not be made by non-residents. I've also seen boats that have twin tanks with a hidden link between them so I'm not sure this necessarily gets around the issue unless HMRC is prepared to start inspecting boats. You may well be correct but since the latest statement only came out a few days ago where did you get the additional info that suppliers of red diesel will be allowed to sell any amount of tax-fee fuel that leisure boaters declare? Anyway, I guess we shall soon know the answer.

Edited September 16, 2008 by blackrose

[Gary Peacock]

From a discussion with a few canal side suppliers today it seems they are going for white to keep their life simple or packing in completely.

 

The general consensus was supplying fuel without you mark it up greatly was not worth the expense before the changes and so is even less now. (Some of these purely carried on in recent years due to operating hire fleets or for regular consumers operating from their premises.)

 

So it looks like it is going to be a choice between paying over the odds for white, getting white cheaper from the garage or buying red from a fuel oil supplier.

 

Sorry folks but that's the way they see it!

 

I can see both sides of the argument but listening to the canal side suppliers views I can see where they are coming from.

Edited September 16, 2008 by Gary Peacock

[blackrose]

From a discussion with a few canal side suppliers today it seems they are going for white to keep their life simple or packing in completely.

 

The general consensus was supplying fuel without you mark it up greatly was not worth the expense before the changes and so is even less now. (Some of these purely carried on in recent years due to operating hire fleets or for regular consumers operating from their premises.)

 

So it looks like it is going to be a choice between paying over the odds for white, getting white cheaper from the garage or buying red from a fuel oil supplier.

 

Sorry folks but that's the way they see it!

 

I can see both sides of the argument but listening to the canal side suppliers views I can see where they are coming from.

 

I can see some chaotic scenes this winter....

Edited September 16, 2008 by blackrose

[mayalld]

Even if the supplier is restricted by HMRC from supplying more than 40% tax free without proof of residential status the first place? I thought the 40% maximum figure had been decided on by HMRC and those representing boaters as a simple way to specifically ensure that greater declarations could not be made by non-residents.

 

Nope.

 

If you read carefully, the position is clear.

 

1. Boaters can make any declaration that they like.
   
2. Suppliers can accept any declaration
   
3. HMRC will normally accept a 40/60 declaration without question.
   
4. If you make a higher than 40/60 declaration, HMRC will probably come calling, and will expect you to provide some objective evidence that your declaration is reasonable
   
5. Any 100/0 declaration, they will come calling, and will want to see an unambiguous non-propulsion tank with no tricksy cross links to propulsion tanks, or a houseboat certificate.
   

[blackrose]

Nope.

 

If you read carefully, the position is clear.

 

1. Boaters can make any declaration that they like.
   
2. Suppliers can accept any declaration
   
3. HMRC will normally accept a 40/60 declaration without question.
   
4. If you make a higher than 40/60 declaration, HMRC will probably come calling, and will expect you to provide some objective evidence that your declaration is reasonable
   
5. Any 100/0 declaration, they will come calling, and will want to see an unambiguous non-propulsion tank with no tricksy cross links to propulsion tanks, or a houseboat certificate.
   

 

Ah, so much for my skim-reading. Thanks.

[Cinimod]

If you have separate tanks, you will easily be able to justify 100% when filling the heating tank.

 

I think you would probably still need to keep the receipts for your propulsion tank too...

Is the onus on HMRC to prove that you are being fraudulent, or on you to prove that you are not?

 

Does this mean there is going to be a shortage of Billy Cans come the winter as the boaters have all bought them to get Diesel from the supermarket? (Especially if you can get an extra 5p/ltr off for buying £100 of food!)

[RLWP]

Does this mean there is going to be a shortage of Billy Cans come the winter as the boaters have all bought them to get Diesel from the supermarket? (Especially if you can get an extra 5p/ltr off for buying £100 of food!)

 

Yes, I think so, together with a nice oily diesel slick from accidental spillage when transferring the white diesel.

 

Richard

[Sir Nibble]

A garage on my rout to the boat sells red at the roadside for 80p/litre. The bloke is happy to sell it into a container and doesn't give a toss what I'm going to use it for. Result!

My erstwhile boss Satan meanwhile, has it in his head that the end of the derogation means he can run his Merc on red, so he does.

[jake_crew]

So will farmers still get red diesel cheap ?

 

If so, surely they use most of it for 'propulsion'.

 

I agree that, as usual, our government is a push over for any lunacy from Brussels.

[Nine of Hearts]

So will farmers still get red diesel cheap ?

 

If so, surely they use most of it for 'propulsion'.

 

They just need to have their tractor lights on and the heater up full blast to qualify for the 60/40 ratio.

[carlt]

So will farmers still get red diesel cheap ?

 

If so, surely they use most of it for 'propulsion'.

 

I agree that, as usual, our government is a push over for any lunacy from Brussels.

They get it cheap for agricultural use, on private land (and limited use on the highway, between fields).

 

Fishermen and other commercial boats also get it at the lower rate.

 

Why is rationalising the fuel duties, so that it is cheaper, overall, for users, lunacy?

 

Fuel is cheaper, overall, on the mainland. I'll definitely be buying mine over there.

 

I'd say our govt has turned a sensible system into an over-complicated, expensive, bureaucratic nightmare.

 

HMG is the looney administration.

[Steilsteven]

They get it cheap for agricultural use, on private land (and limited use on the highway, between fields).

 

Fishermen and other commercial boats also get it at the lower rate.

 

Why is rationalising the fuel duties, so that it is cheaper, overall, for users, lunacy?

 

Fuel is cheaper, overall, on the mainland. I'll definitely be buying mine over there.

 

I'd say our govt has turned a sensible system into an over-complicated, expensive, bureaucratic nightmare.

 

HMG is the looney administration.

 

Well actually this system of taxation was worked out in conjuction with many user groups including Dba, IWA, RYA and RBOA.

The aim was to find as fair a system as possible, only time will tell if it works or not.

HMRC have said from the outset that they are not interested in stinging the boater and would have prefered to have kept the derogation as the revenue they were likely to gain would be outweighed by the admin costs.

For myself, I would have prefered having to use white for propulsion and red for domestic, this is what I expected to happen and one of the reasons for installing a 1000ltr tank in my barge for domestic use. Of course, not everyone is able to do this so what has been decided is probably a good, if not perfect, compromise.

The Netherlands had the best result, they went over to white and abolished boat licences .When I was there three years ago ,white diesel from a bunkering station was about the same price as red diesel here.It was also cheaper than motorists were paying at the filling station!

[Mike Poole]

At the local hireboat base they say that although they are a business they have to charge hirers the full rate because they are hiring a pleasure boat. This seems a bit mad but HMRC seem adamant. Surely hire craft are part of a commercial operation?

 

From a discussion with a few canal side suppliers today it seems they are going for white to keep their life simple or packing in completely.

 

The general consensus was supplying fuel without you mark it up greatly was not worth the expense before the changes and so is even less now. (Some of these purely carried on in recent years due to operating hire fleets or for regular consumers operating from their premises.)

 

So it looks like it is going to be a choice between paying over the odds for white, getting white cheaper from the garage or buying red from a fuel oil supplier.

 

Sorry folks but that's the way they see it!

 

I can see both sides of the argument but listening to the canal side suppliers views I can see where they are coming from.

[Guest]

At the local hireboat base they say that although they are a business they have to charge hirers the full rate because they are hiring a pleasure boat. This seems a bit mad but HMRC seem adamant. Surely hire craft are part of a commercial operation?

I feelit would be unfair on boat owners, if hire boaters got their "propulsion" diesel at a cheaper rate. Others may disagree.

[alan_fincher]

I wrongly assumed hire boats were "commercial" and would not have to pay the extra duty.

 

I was quickly put right on that topic.

 

It does beg the question if the hire fleet is filling up boats ready for a weeks cruising, what percentage will be propulsion, and what percent "other".

 

They can hardly know whether the hirers will only venture through a few miles and locks in a whole week, or whether they will do a major ring.

 

I'm guessing the answer can only be 60% / 40%......