Red diesel

[minerva]

can things get any worse?

 

i ask............

 

don't get me started here... im off for a sherry!

[Guest]

If we hang an old outboard on the back end, will customs think that is our engine and not dip the diesel tanks?

[dor]

Brilliant Cat.

 

I'm going out in the morning (after the inevitable firday night hangover has cleared)to buy up all the old outboards I can find.

 

If the C&I (or whatever they call themselves these days) are as ignorant and stupid as their governmental (thats governMENTAL) masters are, we will havw them well and truly fooled!

[David Schweizer]

A friend of mine has an old Dutch Barge which spent many years in France before coming over here. It has two Diesel tanks, one for propulsion fuel, and one for Heating fuel. And guess what, hidden under the deck boards is a connecting pipe between them which enables the engine to be run on the cheaper fuel.

 

Up until now he hasn't had to use this facilityin the UK, but he used it when bringing it back though France, and did anyone check? Don't be silly, the French only make the rules, they don't abide by them.

 

 

 

 

Just to remind all that the increase is 40 pence per litre.

Yes I heard that on Radio 4 News yesterday, which is interesting because when I added it to the price I last payed for red diesel at a boat yard it worked out a penny cheaper than our local garage. Up until then I thought that they were ripping us off, but that clearly is not the case.

Edited December 9, 2006 by David Schweizer

[Yoda]

I don't know what the current price on the cut is. It does have about 8 pence a litre in tax added at the moment. Soon another 40 pence will be added and it will still be red diesel. There will be no change there.

 

The situation is a little bit dirty, especially if VAT is involved. People should be able to claim back part of their diesel upload in a tax return. Also as business can claim the tax back or in the usual case buy it in untaxed, there is scope to register every boat as a business and work on that basis.

 

One thing is clear, if Farmer Brown has a tank of red next to the cut, he will be very rich sooner rather than later.

[minerva]

erm, how much is cheap cooking oil these days? and if you added a few litres to your tank, who would be able to tell?

 

ignoring the fact your fumes will stink like a chip shop!

 

will getting a trolley full of CO seem suss?....

Edited December 9, 2006 by minerva

[Richard Fairhurst]

The UK have to respect the minimum levels of taxation prescribed by the Directive, this means that the UK do not have to apply the same UK Derv tax to red diesel, that is if red diesel is retained for pleasure craft use. The UK needs to raise red diesel to the EU minimum level and not necessary to the Derv level.

 

I think you've missed the latter half of the sentence, though: "differentiated rates of taxation may be applied by Member States, under fiscal control, in the following cases". In other words, the UK is allowed to charge differentiated rates (one rate for road use, one rate for canal use) only in the four circumstances that follow.

 

The only one of those four that might qualify, as you point out, is the product quality. But the problem there is that, if the UK starts to differentiate by product quality rather than by intended use, you'll get several million motorists filling up their cars with red diesel - and hang the side-effects.

[Supermalc]

One thing is clear, if Farmer Brown has a tank of red next to the cut, he will be very rich sooner rather than later.

 

'Farmer Brown' is very carefully checked, and if his usage is significantly more than it should be, i.e. the average use for the size and type of farm, he is in serious trouble. They are so strict I cannot even buy the odd 5 gallon.

 

Of course there is the odd exception but.......

[Mick and Pauline]

I think you've missed the latter half of the sentence, though: "differentiated rates of taxation may be applied by Member States, under fiscal control, in the following cases". In other words, the UK is allowed to charge differentiated rates (one rate for road use, one rate for canal use) only in the four circumstances that follow.

 

The only one of those four that might qualify, as you point out, is the product quality. But the problem there is that, if the UK starts to differentiate by product quality rather than by intended use, you'll get several million motorists filling up their cars with red diesel - and hang the side-effects.

 

Hi Richard,

 

This misuse of red diesel is already the case, there are already motorists filling up with "doctored black market red diesel", it is quite a good little earner, hence the use of the red dye and yellow marker to try catch those involved. HM Customs have a investigation department just for catching the illegal use of red diesel. It is only the big differential in tax we have at the moment between red diesel and Derv that makes this activity profitable. If the UK government raises the tax on red diesel by the minimum amount to satisfy the EU, this diesel tax differential will reduce to a smaller amount, this then would take the profit out of the illegal use of red diesel, making it not worth the hassle. The UK tax on oil products is paid at the Bonded storage, that is in most cases, the refineries or tank storage where the oil is imported in from abroad. This means, when the retailer gets the red diesel the tax has already been paid to the government, he then applies his own mark up and sells it on.

In my 35 years in a refinery working with Customs, they really were only interested in one product from the fraud point of view and that was Dyed Gasoil (Red Diesel) and it was checked down to the last litre. Like Malcolm said above, HM Customs monitored this diesel right from production to its eventual use.

In short, the present legal implication of using red diesel illegally, will still apply, that is a fine or imprisonment, possible loss of your vehicle but the incentive (profit) to use red diesel in a road vehicle will be a lot less, in fact, only a matter of a few pence per litre difference. That is not worth the risk !!!!.

 

M&P.

[tony collins]

Hi Richard,

 

This misuse of red diesel is already the case, there are already motorists filling up with "doctored black market red diesel", it is quite a good little earner, hence the use of the red dye and yellow marker to try catch those involved. HM Customs have a investigation department just for catching the illegal use of red diesel. It is only the big differential in tax we have at the moment between red diesel and Derv that makes this activity profitable. In my 35 years in a refinery working with Customs, they really were only interested in one product from the fraud point of view and that was Dyed Gasoil (Red Diesel) and it was checked down to the last litre. Like Malcolm said above, HM Customs monitored this diesel right from production to its eventual use.

 

M&P.

 

Didn't I see a newspaper report a few months ago that there is a healthy market in smuggling "cleaned up" red diesel from Eire over the border into NI? I think they caught one gang at it.

 

Tony

[Mick and Pauline]

Didn't I see a newspaper report a few months ago that there is a healthy market in smuggling "cleaned up" red diesel from Eire over the border into NI? I think they caught one gang at it.

 

Tony

 

Hi,

 

That's right, there is a big cash incentive in NI because of the tax difference between Eire and NI. Most of the red diesel start off in the Eire farming industry before going over the border via made up pipework (Farm to farm) or small road tanker.

There was a case last year in South Wales where a guy, a second hand car dealer was suppling is local area with "clean" diesel. He was like Robin Hood, everyone kept quiet in the area, he was finally caught through undercover work by Customs officers plus the amount he was using did not match the equipment he was buying it for.

There have been several methods used to filter out the dye colouring to make it look "clean" but you can not remove the yellow marker. So buyer beware !!!!.

 

M&P.

[twoputtyrats]

erm, how much is cheap cooking oil these days? and if you added a few litres to your tank, who would be able to tell?

 

ignoring the fact your fumes will stink like a chip shop!

 

will getting a trolley full of CO seem suss?....

 

 

How can customs actually tell how much fuel we've burnt it's not as If the system is that regulated.. ?

A judicious use of cooking oil bought from a local and carry every so often blended in with purchased would go a long way to reducing the cost. The thing that worries me is ho wmuch all of the additional security is going to cost me to secure my 60Gallon tank on the boat let alone the costs needing to be bourne by boatyards for securing their supplies...

 

Take one boatyard I know on the T&M for example they have a huge plastic tank - must take about 5 - ten thousand gallons canalside with no physical security apart from a lock on the pump and visible from the road... Now if this was white fuel and someone decided to put a hole in the tank to steal some - any overspill would run straight into the T&M.

 

This is insane - we must keep marked fuel the only sensible option is a rebate for privaledged users. I mean I do it today for my business

mileage in the car - put a claim in to the revenue each year, it seems a logical extension somethign that could be easily implemented and

allows the duty for non road use to float at a rate not tied to the road pricing. It is a lower quality fual and can therefore be handled in this manner. The question is would the system allow me to claim back what I used for heating and power generation - we could fit a meter on the heating system but could not do anything for the alternators...

 

How about a blanket 80% rebate on fuel duty for heating and power generation use on boats without split supplies?

 

Simes.

 

 

Simes.

[Supermalc]

If you really want cheap fuel, moor on a fast flowing, or tidal river. Use a turbine to generate electricity, which you then use for electrolysis to make hydrogen to run your engine on.

[Mick and Pauline]

 

Take one boatyard I know on the T&M for example they have a huge plastic tank - must take about 5 - ten thousand gallons canal side with no physical security apart from a lock on the pump and visible from the road... Now if this was white fuel and someone decided to put a hole in the tank to steal some - any overspill would run straight into the T&M.

 

This is insane - we must keep marked fuel the only sensible option is a rebate for privileged users. I mean I do it today for my business mileage in the car - put a claim in to the revenue each year, it seems a logical extension something that could be easily implemented and allows the duty for non road use to float at a rate not tied to the road pricing. It is a lower quality fuel and can therefore be handled in this manner. The question is would the system allow me to claim back what I used for heating and power generation - we could fit a meter on the heating system but could not do anything for the alternators...

 

How about a blanket 80% rebate on fuel duty for heating and power generation use on boats without split supplies?

 

Simes.

 

Hi Simes,

 

Yes you have a good point about fuel security because if the government decided not to increase the tax on red diesel for boat engines to EU levels and instead they insist we use white diesel then it will become a very attractive supply source for resale to motor vehicles owners. The present red diesel in your boat tank and in boatyard storage is too messy to resell into the motor vehicle market because of the dye, marker and additional charges brought by HM Customs if caught with it. If the T & M boatyard you mentioned had white diesel in their 5k > 10k gall tank it would be worth £20,250 > £40,500 and is twice the value if it was red diesel at today's prices.

 

If red diesel is retained at a higher tax level and a tax reclaim system is set up, it will be easy for boats with separate heating and generator tanks, collect your tank refill receipts for proof of usage. If you have only one tank for everything then it will be more difficult and as you say, it may fall back on an agreeable percentage of the fuel you have used. This percentage could an area that the BMF could discuss with government.

 

M&P.

Edited December 9, 2006 by Mick and Pauline

[Dave T.]

Sorry, I don't follow you. My heating diesel goes in at one end of the boat. My propulsion diesel goes in at the other. One of them is a tank connected to the stove, the other a tank connected to the engine.

 

Because the tax on white diesel (and petrol) is the nearest to a hypothecated tax we have.

 

Petrol/white diesel taxes (very very roughly speaking) pay for the upkeep of the roads. No it's not a direct correlation, but if the EU suddenly ruled that it was illegal to put tax on any fuel whatsoever, you can bet the UK government would instantly increase the road fund licence (='road tax') to compensate.

I'm with you there, though I'm sure it will make some difference. My main concern is that it'll penalise the people with £20,000 boats who cruise lots of the system, but not have much effect on those who have a £150,000 shiny boat which rarely ventures out of the marina. The diversity of the waterways is to be cherished, and this is another nail in its coffin.

 

Richard –

 

If the idea is that the tax is hypothecated, then do we have a case to insist that the tax is channelled to the upkeep of the waterways, in the same way that road fuel tax is supposed to go to roads maintenance? If so, this would give a much bigger boost to BW's (and EA's) resources than our annual licence fees, AND it would be proportional to our individual (mobile) use of the waterways. In the Licence Fee Consultation 'White Paper', BW were bemoaning the lack of a means of charging fees related to waterways use. Well, here it is!

 

If the extra revenue CAN be channelled to BW & EA, then the fairer way to go from here would be to reduce all licence fees to a nominal flat rate and rely on the increased fuel duty to provide (more than) that level of income. Results: more people can afford to go on boating; more revenue for BW; Less red tape. I suspect that many boaters would be prepared, even happy, to 'pay as we go' through higher fuel prices if the licence fees were reduced in this way.

 

The key question I have is: how (and who) should we lobby to make sure the extra duty goes to the waterways AND licence fees reduced accordingly?

[Yoda]

Welcome to the frey Dave. Have fun!!

[Mick and Pauline]

Richard –

 

If the idea is that the tax is hypothecated, then do we have a case to insist that the tax is channelled to the upkeep of the waterways, in the same way that road fuel tax is supposed to go to roads maintenance? If so, this would give a much bigger boost to BW's (and EA's) resources than our annual licence fees, AND it would be proportional to our individual (mobile) use of the waterways. In the Licence Fee Consultation 'White Paper', BW were bemoaning the lack of a means of charging fees related to waterways use. Well, here it is!

 

If the extra revenue CAN be channelled to BW & EA, then the fairer way to go from here would be to reduce all licence fees to a nominal flat rate and rely on the increased fuel duty to provide (more than) that level of income. Results: more people can afford to go on boating; more revenue for BW; Less red tape. I suspect that many boaters would be prepared, even happy, to 'pay as we go' through higher fuel prices if the licence fees were reduced in this way.

 

The key question I have is: how (and who) should we lobby to make sure the extra duty goes to the waterways AND licence fees reduced accordingly?

 

Hi Dave,

 

Well I think you have a good point there and I hope Eugene is still looking in on the Forum and reads this, it may get back to the ones who can talk to the ones in high places but he is not as active on here lately. The other way could be Gary of LB's taking it forward to his contacts on the BMF etc.

 

M&P.

[Dave T.]

Hi Dave,

 

Well I think you have a good point there and I hope Eugene is still looking in on the Forum and reads this, it may get back to the ones who can talk to the ones in high places but he is not as active on here lately. The other way could be Gary of LB's taking it forward to his contacts on the BMF etc.

 

M&P.

 

I've done a couple of 'letters to the editor', some blog comments and a note to BW's Sally Ash and Amanda Strang, all along these lines, mainly to get people thinking about what CAN be done rather than just bemoaning the problem. I actually suggested exactly this approach in the Licence Fee Consultation last year, thinking that the derogation would probably be dropped. Now it HAS gone, seems like the time for urgent action.

 

Can you/anyone else suggest anyone I/we should/could approach more directly? Which Government ministers, for example?

[minerva]

i suppose this is why joining such things as the resdiential boat owners association or the inland waterways association is a good idea....they fight your corner in such cases?. after all this is going to affect ALL of us now. they are probably doing it as we speak i would imagine...

 

the french rant and rave and get pretty much what they want from their governments, i thinks its more than high time for a lot of people here to start doing the same, unless you all want to be outpriced from this hobby/way of life?

 

there comes a time people, where you HAVE to stand and be counted.

[Mick and Pauline]

Can you/anyone else suggest anyone I/we should/could approach more directly? Which Government ministers, for example?

 

Dave,

 

I hope the government go back to the same organisations they used originally to fight the derogation of red diesel. The change to red diesel taxation will effect all different types of boating, from sea going vessels both commercial and private to inland waterways both boaters and boatyards etc. These organisations do represent the full cross section of the boating fraternity. The government body to handle the change in red diesel taxation will be the Treasury and will probably do this with close talks with HM Customs because it will be the Customs who will have to manage the new fuel taxation ruling.

 

The first big question is, should the government keep red diesel for pleasure boating and increase the tax to comply with the EU ruling or abolish it.

 

Keeping red diesel and increasing the tax would probably be agreeable with the majority, from fuel suppliers / retailers to end user but not so good for the commercial boats and farming users if a tax refund system was not set up.

 

To do away with red diesel just for pleasure boats would be the worst option, the biggest complaint would come from Customs because it would give them a big problem policing the new changes. The fuel suppliers / retailers / boatyards to end user would all be effected from loss of sales and the increased cost of fuel.

 

M&P.

[twoputtyrats]

Dave,

 

I hope the government go back to the same organisations they used originally to fight the derogation of red diesel. The change to red diesel taxation will effect all different types of boating, from sea going vessels both commercial and private to inland waterways both boaters and boatyards etc. These organisations do represent the full cross section of the boating fraternity. The government body to handle the change in red diesel taxation will be the Treasury and will probably do this with close talks with HM Customs because it will be the Customs who will have to manage the new fuel taxation ruling.

 

The first big question is, should the government keep red diesel for pleasure boating and increase the tax to comply with the EU ruling or abolish it.

 

Keeping red diesel and increasing the tax would probably be agreeable with the majority, from fuel suppliers / retailers to end user but not so good for the commercial boats and farming users if a tax refund system was not set up.

 

To do away with red diesel just for pleasure boats would be the worst option, the biggest complaint would come from Customs because it would give them a big problem policing the new changes. The fuel suppliers / retailers / boatyards to end user would all be effected from loss of sales and the increased cost of fuel.

 

M&P.

 

M&P - thanks for the comments - it really isn't practical to switch us in the timescales mooted for an entire industry to switch its method and manner of fuel supply, commerial organisations are already well versed in reclaiming tax based on receipts and busness expense so nothing new there the policy just has to be set...

 

I really like the idea of retaining red and paying the higher duty but using it as per the roads in a ringfenced manner to fund the waterways..

 

BUT we have to be careful about the sums here - If I remember rightly the duty involved is small compared to the BW income from licences

 

Furthermore we have to be very careful as this train of thought will be seen by DEFRA as a mechanism to recover the BW budget cuts by having us pay for them - Oh look we've found all this extra money from government - we won't need to cut your funding after all - just the sort of Stealth increases the government is famous for? Cynical - me ?

 

Ministers to talk to will be the Treasury/HMRC but industry bodies are key here as well - as the treasury will want to discuss with them how HMRC actually collect this revenue from their members, and the impacts on them of the changeover and how this will work.

 

Simes.

[Dave T.]

Dave,

 

I hope the government go back to the same organisations they used originally to fight the derogation of red diesel. The change to red diesel taxation will effect all different types of boating, from sea going vessels both commercial and private to inland waterways both boaters and boatyards etc. These organisations do represent the full cross section of the boating fraternity. The government body to handle the change in red diesel taxation will be the Treasury and will probably do this with close talks with HM Customs because it will be the Customs who will have to manage the new fuel taxation ruling.

 

The first big question is, should the government keep red diesel for pleasure boating and increase the tax to comply with the EU ruling or abolish it.

 

Keeping red diesel and increasing the tax would probably be agreeable with the majority, from fuel suppliers / retailers to end user but not so good for the commercial boats and farming users if a tax refund system was not set up.

 

To do away with red diesel just for pleasure boats would be the worst option, the biggest complaint would come from Customs because it would give them a big problem policing the new changes. The fuel suppliers / retailers / boatyards to end user would all be effected from loss of sales and the increased cost of fuel.

 

M&P.

 

M&P -

Thanks for the input. Unless I am very much mistaken, 'red diesel' and 'low rate duty diesel' are one and the same thing. I don't think red diesel is going to disappear, or the duty on it be raised as a result of this ruling. It will presumably continue to be available to our farmer friends in the same way that it always (?) has been. What (I think) will change is that the leisure boating market will not have any access to it. In other words, we shall be on 'white' diesel, the same as the road users, DERV, in fact. As you say, the worst option!

 

IF I have got the right end of the stick, there will be no option to 'keep red diesel and increase the tax'. Low duty diesel, aka red diesel, will no longer be available to us. We may be fortunate enough to have a lower duty put on than DERV has, but my reading so far does not make me optimistic. If that were the case, road users would start trying to use marine diesel, and there would be a case to dye it (a different colour?) to prevent THAT bit of duty evasion!

 

I think we may as well accept that we will be paying similar prices to road diesel, and concentrate our efforts on making sure that the extra revenue is 'hypothecated' (i.e. reserved and targeted) to waterways use. There is little doubt in my mind that the extra sums which Customs and Excise (now part of the Inland Revenue) will receive in a year will be well in excess of the total of annual boat licences paid. Perhaps someone has access to these figures or can point us/me in the right direction? Anyone from BW (Licensing) reading this?

 

Dave T.

[chris w]

I have calculated the following which is just an initial estimate of the additional costs due to the ending of derogation and assumes we have to pay the full 40p additional tax. I have also further calculated what percentage fuel is used for heating and thus what amount we might be able to claim back on our tax returns. (Of course another assumption that we might be allowed to). One could also make a case for the fact that some engine fuel is used for generating electricity rather than motive power and therefore should also be tax-deductible. I have not taken this into consideration below. Heating times will vary depending on the season of course but I have taken an average for the year. (Of course not everyone has diesel heating so it might be better to just use the gross figures overall).

 

The bottom line estimate is that the cost of fuel will increase by around £260 per year for an average boater (50 days a year). There are apparently (from the web) 29,000 boats registered with BW. Let's guess that 20,000 of those use diesel (ie: excluding GRP outboards and boaters that never move). The additional revenue to the Government would then be of the order of £5.2M pa. If we were able to reclaim heating fuel than the additional average revenue to the Government would be of the order of £4.0M pa. This figure also reflects the annual additional take for the Government if one disregards diesel for heating completely as I have no idea how many boaters have diesel heaters.

 

As a comparison, BW Revenue due to to licence fees must be, I guess, of the order of 29,000 x (say) £500 average = £14M approx pa

 

I appreciate these are only estimates based on assumptions but I thought they might be useful as a "stake-in-the-ground" from which to explore costs further. It is interesting to note that my estimated additional revenue figure pretty much wipes out the annual budget cut imposed on BW by DEFRA.

 

 

 

average engine consumption 2.0 litres/hour

 

average heating consumption 0.6 litres/hour

 

 

average cruising time per day 5.0 hours

 

average heating time per day 5.0 hours

 

 

therefore, cruising fuel used 10.0 litres per day

 

therefore, heating fuel used 3.0 litres per day

 

therefore, total fuel used 13.0 litres per day

 

therefore, percentage of fuel attributable to heating 23.1% per day

 

total days cruising per year 50 (estimate)

 

therefore, total fuel used 650 litres per year

 

total fuel cost @ 90 pence per litre £585 per year

 

litres used attributable to heating @ 23.1% 150 litres per year

 

total fuel cost attributable to heating @ 23.1% £135 per year

 

tax attributable to heating @ 40 pence per litre tax £60.00 per year

 

 

 

previous annual costs: (650 litres @ 50 pence per litre) £325.00 per year

 

additional cost due to ending of derogation: (650 litres @ 40p extra per litre) £260.00 per year

 

less (heating) tax reclaimed £60.00 per year

 

net additional cost due to ending of derogation (with heating tax rebate) £200.00 per year

Edited December 11, 2006 by chris w

[Yoda]

Very interesting Chris. I believe that the figures are on the low side so more tax would be claimed back. It does sum up, no pun intended, what I have written on this subject.

[miles beyond]

That's right, there is a big cash incentive in NI because of the tax difference between Eire and NI. Most of the red diesel start off in the Eire farming industry before going over the border via made up pipework (Farm to farm) or small road tanker.

There was a case last year in South Wales where a guy, a second hand car dealer was suppling is local area with "clean" diesel. He was like Robin Hood, everyone kept quiet in the area, he was finally caught through undercover work by Customs officers plus the amount he was using did not match the equipment he was buying it for.

There have been several methods used to filter out the dye colouring to make it look "clean" but you can not remove the yellow marker. So buyer beware !!!!

 

There is no red diesel in the Irish Republic - their agricultural diesel (and therefore boat diesel) is dyed green and has been for many years. Not for reasons of nationalism I believe but precisely to address the problem with cross border smuggling because of different rates of taxation.

 

Ireland is also affected by this end of the derogation too, by the way.

 

I also believe that while the dye is an easy way for the Customs to check, the sniffers they use can detect it even id the dye colour has been filtered out. A commercial fisherman I met once told me that the filters on deep sea trawlers were so efficient they re,move all traces of the dye.

 

An interesting scenario if diesel is taxed at the same rate as DERv, and from Richard Fairhurst's research that would seem to be the case, is that no marina will be able to compete with the pump price at the big supermarkets. That will lead to a good number of people refuelling their boats from jerry cans - and the pollution risk will be great. Only one 5 gallon jerry can of Texaco's finest in the cut will create a massive polluted length of waterway and a vast amount of environmental damage I imagine.

 

Let us hope that the government takes a long long time looking at how best to implement these measures. They should do - there are a lot of complications involved.