HM Revenue and Customs launches red diesel consultation

HMRC Consultation © RYA

HM Revenue and Customs is inviting views on, and seeking information about, proposed changes to the rules for red diesel used in private pleasure craft as a result of the judgment of the Court of Justice of the European Union (CJEU).

In 2018, the CJEU ruled that the UK's taxation rules for diesel used in private pleasure craft contravened the Fuel Marker Directive. The Directive is designed to ensure that any misuse of diesel crossing European Union internal borders can be detected given the variation in duty treatment in member states.

HM Revenue and Customs' 8-week consultation sets out the changes the government intends to make to bring the UK's practice into line with the Directive and seeks evidence about the impact of the changes on users of diesel powered craft and their fuel suppliers.

Consultation closes at 11:45pm on 9 September 2019

The government intends to abolish the scheme introduced in 2008 that allowed users of diesel powered private pleasure craft (e.g. yachts, canal boats and motorboats) to purchase red diesel and pay the duty differential between red and white diesel on the fuel used for propulsion.

It intends to remove the right of operators of such craft to use red diesel for propulsion and mandate the use of white diesel. Users will be allowed to continue to use red diesel for on-board non-propulsion use where they have a separate fuel tank for this purpose. This means that craft with only one tank will pay more tax than they currently do as they will have to purchase fuel taxed at the higher white diesel duty rate for both propulsion and non-propulsion uses, and pay the standard rate of VAT as white diesel is not eligible for the reduced rate of VAT.

The consultation outlines how the government intends to implement the judgment by requiring private pleasure craft to use white diesel for propulsion, and seeks evidence regarding the impact this will have on users of diesel propelled craft.

The responses will be used to help determine whether a period will be required for suppliers, known as Registered Dealers in Controlled Oils (RDCOs), and users of diesel fuel to adapt to using only white diesel for propulsion of private pleasure craft and, if needed, the length of any such period.

RYA Action

The RYA will respond to the consultation in line with the policy on this issue agreed by its Cruising and Government Affairs Committee, setting out the many practical issues that implementation will bring and seeking a long transition period if the UK remains compelled to implement the judgement. This policy also urges Government not to implement the CJEU judgement in the event of a no deal Brexit. The RYA has been part of a group of key stakeholders that HMRC has engaged with pre-consultation and a further meeting will be held shortly, which will provide the opportunity to reiterate our policy.

Boaters should experience no change in respect of their use of red diesel both in the UK and overseas until the UK Government makes changes to existing legislation. The RYA will be lobbying for any new legislation to include a transition period of sufficient length to recognise that changes will need to be made to the supply system and that the marker dye in red diesel will be detectable in boat fuel systems for a considerable period of time after the commencement date of any change to the use of white diesel.

The consultation is available here

Please respond to the consultation

The RYA encourages all UK users of diesel propelled craft, particularly private pleasure craft, and those involved in the supply of fuel to UK craft to respond to the consultation. More detailed guidance on how to respond will be made available in due course.

Email to:

Write to: Gary Satchell, Excise & Environmental Taxes Policy Design Team
HM Revenue and Customs
Room 3/36
100 Parliament Street
London, SW1A 2BQ

Telephone (Mondays to Thursdays only): 03000 585802

A summary of responses will be published after this consultation concludes. This consultation will inform when the changes will be brought into effect in legislation and whether any adjustment period is needed.