HMRC: Excise Notice 75 Rebated Fuels Conditions Detailed for GB

• HMRC's Excise Notice 75 outlines the specific conditions for using rebated diesel, biodiesel, and kerosene in Great Britain.
• Reduced excise duty applies only to 'excepted machines' when they are used for designated qualifying purposes.
• Biodiesel and HVO are treated as heavy oil under the Hydrocarbon Oil Duties Act 1979, requiring marking and supply by registered dealers.
• Private pleasure craft in Great Britain can use red diesel for propulsion only if full excise duty is declared and paid on the propulsion fuel.
• Rebated kerosene and kerosene bioblend are strictly limited to generating heat for use in or on premises.

The ability to use fuel taxed at a reduced rate hinges on both the type of vehicle or machine and the specific purpose for which it is being operated.

Her Majesty's Revenue and Customs (HMRC) has issued comprehensive guidance in Excise Notice 75, detailing the conditions under which rebated diesel, biodiesel, or kerosene may be used in vehicles and other machinery across Great Britain. While diesel, also known as gas oil or DERV, is typically subject to the full rate of excise duty, specific circumstances allow for a reduced, or 'rebated,' duty rate. This reduction is contingent upon both the type of vehicle or machine involved and the particular purpose for which it is being operated.

The rebated rate of excise duty is officially identified as 'Marked gas oil' within the rates and allowances list. The notice clarifies that references to 'red diesel' encompass not only rebated diesel but also rebated biodiesel, hydrotreated vegetable oil (HVO), and kerosene bioblend. The ability to use fuel taxed at a reduced rate hinges on both the type of vehicle or machine and the specific purpose for which it is being operated. Any vehicle or machine not designated as an 'excepted machine' is strictly prohibited from using rebated fuel.

The updated guidance provides distinct rules for various rebated fuel types. Biodiesel and HVO, both diesel quality fuels derived from biomass, are treated identically to heavy oil under the Hydrocarbon Oil Duties Act 1979 and are subject to the same excise duty rates as diesel. These fuels can be supplied at a reduced duty rate for the same applications as diesel, provided all applicable requirements are met. Crucially, they must be marked and can only be supplied by a registered dealer in controlled oils (RDCO).

Kerosene, another heavy oil, may also qualify for a fully rebated rate. Like other rebated fuels, it must be marked and its use is restricted to generating heat for premises. Kerosene bioblend, a mixture of kerosene and biodiesel, also benefits from a fully rebated rate if its intended use is heat generation. It is important to note that 'bioblend' specifically refers to fuel produced by mixing biodiesel with heavy oil *before* the duty point; mixing these components *after* duty has been charged, such as combining rebated biodiesel with rebated kerosene for commercial heating, does not constitute bioblend and is not permitted. Fuel oil, characterized as heavy oil containing asphaltene, is commonly utilized as marine diesel or in furnaces.

The core of the rebated fuel regulations revolves around 'excepted machines,' which are specific types of vehicles and machinery permitted to use these fuels when engaged in qualifying purposes. The notice emphasizes that not all qualifying purposes apply universally to all vehicle types, and users are advised to verify their specific vehicle and its intended use for entitlement. Detailed information regarding acceptable uses for each vehicle type is provided in section 3 of the Excise Notice.

For marine transport, all boats and marine vessels, with the sole exception of private pleasure craft, are classified as excepted machines and are therefore permitted to use red diesel for any purpose. Private pleasure craft, however, are not considered excepted machines. In Great Britain (England, Scotland, and Wales), these craft may use red diesel for propulsion only if the user makes a declaration of the fuel quantity intended for propulsion and pays the full excise duty on that specific amount. A distinct rule applies to private pleasure craft in Northern Ireland, where the use of red diesel for propulsion is entirely prohibited. Further details on fuel for private pleasure craft and flying are available in Excise Notice 554. Additionally, machines and appliances primarily used to generate heat and electricity for non-commercial premises are also permitted to use red diesel.

This updated Excise Notice 75 provides critical clarification on the legitimate use of rebated fuels (red diesel, biodiesel, kerosene) in Great Britain. Lawyers and compliance officers must review these detailed conditions to ensure clients operating vehicles or machinery, particularly in sectors like agriculture, construction, or marine, are fully compliant with fuel duty regulations and avoid significant penalties.

Source: Original reporting via GOV.UK