HMRC: Excise Notice 554 on Private Pleasure Craft Fuel Duty & Red Diesel

• HMRC Excise Notice 554 confirms that diesel used for private pleasure craft propulsion is now subject to the full rate of excise duty.
• In Great Britain, private pleasure craft can still use rebated (red) diesel, but the rebate amount must be paid for any fuel used for propulsion.
• Registered fuel dealers in Great Britain are responsible for collecting and remitting the full duty on rebated fuel declared for propulsion and retaining customer declarations.
• From October 1, 2021, private pleasure craft in Northern Ireland with a single fuel tank must use full duty-paid diesel, with specific exceptions for fuel obtained before this date or in Great Britain.
• Private pleasure craft in Northern Ireland with separate fuel tanks may continue to use red diesel for non-propulsion purposes after October 1, 2021.

The core change mandates that diesel used for propelling private pleasure craft is now subject to the full rate of excise duty, eliminating the previously available reduced rate.

HMRC's Excise Notice 554 provides crucial guidance on the charging and collection of excise duty for fuel consumed by private pleasure craft. The primary legal framework underpinning these regulations is the Hydrocarbon Oils Duties Act 1979, which has been subject to amendments by the Finance Acts of 2008 and 2012. This notice, while offering procedural information, explicitly states that it does not alter the existing law.

The core change mandates that diesel used for propelling private pleasure craft is now subject to the full rate of excise duty, eliminating the previously available reduced rate. This significant shift impacts operators and fuel suppliers alike, requiring careful attention to compliance. However, the duty treatment for petrol used in private pleasure craft remains unchanged, as it was already subject to the full rate.

In Great Britain, private pleasure craft retain the option to use rebated diesel, commonly known as red diesel, which includes rebated sulphur-free diesel and rebated bioblend. However, this continued use comes with a critical condition: an amount equivalent to the rebate must be paid on any portion of this fuel used for propulsion. Consequently, it is now illegal to use rebated diesel, biodiesel, or bioblend for propelling a private pleasure craft in Great Britain unless this rebate equivalent has been duly paid.

The responsibility for ensuring this payment largely falls on fuel suppliers. Registered dealers in controlled oil, who supply rebated diesel to private pleasure craft in Great Britain, are accountable for collecting and remitting the full rate of duty on fuel that customers declare will be used for propulsion. These fuel suppliers excise duty responsibilities include charging their customers an amount equal to the increased duty, paying this sum to HMRC, and meticulously retaining the declarations made by their customers regarding fuel usage.

The rules for Northern Ireland pleasure craft fuel tax introduced specific changes from October 1, 2021. For private pleasure craft in Northern Ireland equipped with only one fuel tank, which serves both propulsion and non-propulsion needs, the use of full duty-paid diesel is now mandatory. An exception exists where a registered supplier can offer a discount, equivalent to the rebate, on 40% of the fuel supplied, accounting for non-propulsion use, and subsequently claim this amount back from HMRC.

However, red diesel can still be used in a single tank under specific circumstances: if it was put into the tank either in Northern Ireland before October 1, 2021, or in Great Britain after October 1, 2021, with the propulsion duty paid, before traveling to Northern Ireland. Operators traveling to Northern Ireland with red diesel refueled elsewhere are strongly advised to maintain comprehensive documentation, such as receipts, logbooks, and declarations, to demonstrate to HMRC the location and time of refueling. For private pleasure craft in Northern Ireland, including houseboats, that feature separate tanks for propulsion and non-propulsion uses, red diesel may continue to be used in the non-propulsion fuel tank after October 1, 2021, though no discount can be applied by the supplier to the 'white' diesel designated for propulsion.

It is important to note that these revised rules primarily target private pleasure craft. Commercial craft, for instance, are permitted to use rebated diesel without the requirement of a written declaration. Furthermore, qualifying marine craft may continue to claim a full refund of duty under the existing relief from fuel duty for marine voyages.

This distinction highlights the targeted nature of the changes, focusing on the recreational boating sector. The notice serves as a critical reference for understanding the nuances of fuel duty obligations, ensuring that both operators and fuel suppliers comply with the updated regulations to avoid penalties.

Lawyers and compliance officers must advise clients operating private pleasure craft or supplying fuel to them on the updated excise duty rules, particularly regarding the use of red diesel in Great Britain and Northern Ireland, to ensure compliance and avoid penalties. This includes understanding the responsibilities for duty payment by both users and registered dealers, and the specific rules for single vs. separate fuel tanks in Northern Ireland from 1 October 2021.

Source: Original reporting via GOV.UK