If you produce, import, warehouse, sell or deal in motor and heating fuels, you may need to register your business or your premises with HM Revenue & Customs (HMRC). You also may need to pay Fuel Duty to HMRC on fuel that you produce, import or use. Fuel Duty is payable at varying rates depending on the type of fuel and its use.
Motor and heating fuels include hydrocarbon (mineral) oils, biofuels, fuel substitutes and fuel additives.
If you use certain fuels or oils for specific purposes, or export them for use outside the UK, you may be able to claim relief from or a refund of Fuel Duty.
This guide explains whether or not your business needs to register with or obtain approval from HMRC to produce, import, buy or deal in certain fuels. It also explains what your responsibilities are, whether you need to pay Fuel Duty, what reliefs are available and how to claim them.
Production of hydrocarbon (mineral) oils
If you produce hydrocarbon (mineral) oils in the UK, you must register your premises and plant with HMRC as an oil producer.
If you produce certain oils - generally those that are liable for Fuel Duty - you must also store these oils in premises that are approved by and registered with HMRC as an excise warehouse.
Responsibilities of oil producers
When your business and your premises are registered with HMRC, you have legal responsibilities for controlling your premises and the oils stored there. You must account for Fuel Duty on these oils before they can leave your warehouse.
You may be able to pay lower rates of duty on ‘rebated oils’ - for example, red diesel and marked kerosene. But you will have additional responsibilities for these oils, including:
- marking them, or having them marked
- restrictions on who you supply them to
- the type and quantity you supply
- taking sensible and reasonable steps to prevent criminals obtaining them
- keeping detailed records
- providing records to HMRC
Production of biofuels, fuel substitutes and fuel additives
Biodiesel is a liquid fuel produced from biomass or waste cooking oil that is suitable for use in diesel engines.
Bioethanol is defined as a liquid fuel consisting of ethanol produced from biomass, and capable of being used for the same purposes as light oil.
Other fuel substitutes
A ‘fuel substitute’ is any liquid (except water under certain circumstances) that is not hydrocarbon (mineral) oil, biodiesel, bioethanol or bioethanol blend that is used to fuel any engine, motor or other machinery or is added to motor fuel. This means it will be liable for Fuel Duty.
Any liquid that is added into the fuel supply of vehicles either via the filler cap or other parts of the fuel system is classed as a ‘fuel additive’.
Fuel Duty on biofuels and other fuel substitutes
Biofuels and other fuel substitutes are liable for Fuel Duty when they are intended for use as a fuel for any engine, motor or other machinery, or as an additive or extender in fuel, or to be blended with hydrocarbon oil.
They are not liable for duty then they are intended for other specific uses, such as heating fuel.
When biofuels and fuel substitutes are liable for Fuel Duty, the duty is due at the earliest of the following points:
- when they are sent out from premises registered for production
- when they are used as a motor fuel
- when the decision has been made that they are going to be used as a motor fuel (known as being ‘set aside’ as motor fuel)
Fuel Duty rates for biofuels and other fuel substitutes
The rate of duty on biofuels, fuel substitutes and additives is worked out using the proposed or actual use of the fuel and the type of engine. For example, if a substitute or additive is to be used as a road fuel in a diesel engine, then the rate of duty for diesel for road use will apply.
Before April 2010, biofuels (biodiesel and bioethanol) produced from biomass or waste cooking oil that were intended for use as road fuel received a 20 pence per litre reduction on the Fuel Duty rate.
From 1 April 2010, this reduction was stopped for biodiesel and bioethanol produced from biomass. These are now subject to the same rate of duty as the hydrocarbon road fuel.
However, biodiesel produced from waste (used) cooking oil will continue to have a 20 pence per litre duty differential until 31 March 2012.
Registration as a producer
If you produce more than 2,500 litres of biofuel or other fuel substitutes a year, or you use them as motor fuel and duty has not been paid on them, you will need to contact HMRC to register as a producer. HMRC will make arrangements for you to account for and pay the Fuel Duty due on any products set aside, or delivered for use, as a motor fuel.
You will need to retain records of your overall production, supply and use and you will have other responsibilities.
Bringing motor and heating fuels into the UK
There are a number of ways you can handle Fuel Duty if you are importing hydrocarbon oils or biofuels into the UK. Your best approach depends on how frequently you will be importing, whether you are importing from inside or outside the EU, and whether duty has already been paid on the fuel in another EU country.
Producers and warehousekeepers
You can bring dutiable fuel into the UK to be warehoused on a duty-suspended basis within your own storage facilities if you follow the correct procedures and you are either:
- a motor and heating fuel producer and you are authorised to warehouse imported oil received directly from a ship
- an authorised excise warehousekeeper approved to import specified types of oil
Occasional imports of fuel in duty suspension from other EU countries
If you only import fuel that is in duty suspension from other EU countries on a one-off or infrequent basis, then you can apply to HMRC to become a Temporary Registered Consignee. You must do this for every consignment, and you must follow the procedures for Registered Consignees.
You will also have to pay the duty to HMRC in advance.
Regular imports of fuel in duty suspension from other EU countries
If you regularly bring fuel in duty suspension into the UK from other EU countries, you can do one of the following three things:
- apply for approval as a Registered Consignee
- use the services of a Registered Consignee who will act as your agent and import it for you
- use the services of an authorised warehousekeeper who receives fuel on your behalf into duty suspension in an excise warehouse approved to receive imports
If you use a Registered Consignee, they are not allowed to store or dispatch excise goods in duty suspension. They must account for the Fuel Duty due on the goods as soon as they are received. So if you are approved as a Registered Consignee yourself, you will also have to pay the Fuel Duty on receipt of the goods.
See the page on Registered Consignees in the guide on excise goods, warehousing and movement.
Importing duty-paid fuel from other EU countries
If you wish to import fuel that has been released for consumption in another EU country (and is therefore classed as duty-paid goods) into the UK on a commercial basis, you can either:
- follow the procedures for the standard scheme for unregistered Commercial Importers to import duty-paid goods into the UK - but any UK duty liability must be paid in advance
- follow the appropriate procedures, and if you are approved as a Registered Commercial Importer duty payments can be deferred
Imports from countries outside the EU
If you import dutiable fuel from outside the EU, it becomes liable for UK Fuel Duty when it reaches the UK. However, the duty won’t be payable at that point if either of the following applies:
- it is delivered to an excise warehouse approved to hold imported oil, or to an approved oil producer’s premises
- the duty is eligible for relief
Customs Duty and VAT
For any fuel brought into the UK, including that delivered to an excise warehouse or oil producer, you will also have to follow procedures regarding the payment of Customs Duty and VAT.
Exporting or despatching oils from the UK
You can ship oils from the UK, without payment of UK Fuel Duty in certain circumstances, to:
- the Isle of Man
- other EU countries
- outside the EU
- ships’ stores
Fuel Duty information for dealers in controlled oils
The following oils are eligible for rebated duty rates, and are controlled to prevent misuse:
- marked rebated gas oil (red diesel)
- red diesel blended with biodiesel
- marked rebated kerosene (paraffin, etc)
- aviation turbine fuel (Avtur)
Dealers in controlled oils
If you are a producer, importer, distributor or retailer of oils and you want to supply either commercial or private end-users with controlled oils, you may need approval from HMRC as a Registered Dealer in Controlled Oils (RDCO). You may need this approval whether you physically handle the oils or are simply a ‘dry broker’.
Whether you need approval and/or need to make Fuel Duty returns depends on which oils you deal in and how you buy and sell them.
- deal in red diesel or marked rebated kerosene in bulk, you must apply for approval as an RDCO and make regular returns
- only deal in Avtur in bulk, you must apply for approval as an RDCO but you don’t need to make returns
- only sell controlled oils in pre-packaged containers of 20 litres or less, but you buy in bulk, you must apply for approval as an RDCO but you don’t need to make returns
- only buy and sell controlled oils in pre-packaged containers of 20 litres or less, you don’t need to do anything
Fuel card companies
If you own a fuel card company, you need approval if you own the cards and your customers fill up at pumps on sites owned by an oil company. This is because you are re-supplying the end customer. But if the oil company owns the cards and you simply handle the administration, you don’t need approval.
If you own a hardware store and you sell controlled oils, such as paraffin:
- only in the same pre-packaged containers of 20 litres or less that you buy in, you don’t need approval
- in containers of 20 litres or less that you pre-package yourself from bulk supplies, you need approval but you don’t need to make returns
- by decanting bulk supplies into customer containers, you need approval and you need to make returns to HMRC
Plant hire firms
If you own a plant hire firm and you supply controlled oil in the tanks of your vehicles, then:
- if you also supply a driver, you don’t need approval
- if you supply only the vehicles, you need approval
- you don’t need to account for the receipt of any oil in the tanks of returned plant in your records
- if your customer fills the vehicle tank from their own stocks before returning it, they don’t need approval
If you are a farmer and occasionally hire out a tractor including a tank of controlled oil, you don’t need approval. But if you’re actually running a tractor hire business, you do.
Similarly, if you occasionally let a contractor working on your land fill their vehicles from your fuel stocks, you don’t need approval.
Main contractors and subcontractors
If you are a main contractor and you supply subcontractors with controlled oil on your site for use on that site, you don’t need approval - but you do if the oil is used elsewhere, because you’ll be distributing the oil.
Agents, co-operatives, buying groups and machinery rings
If you are an agent (including co-operatives, buying groups, machinery rings) who arranges a supply of controlled oil on behalf of someone else (a principal) you don’t need to be an RDCO yourself if all of the following apply:
- the supplier of the oil (who must be an RDCO) has accepted that the customer is the end-user
- the controlled oil is delivered direct from the RDCO to the person or end-user on whose behalf you are acting
- the invoice issued by the RDCO is addressed to the person or end-user on whose behalf you are acting
If you are an RDCO but you act as agent in the above circumstances, you don’t need to enter the supply on your return.
How to apply for approval as an RDCO
To apply for approval as an RDCO, you should complete form HO 4 and send it to HMRC. You must wait for approval to be given before you can start dealing in controlled oils.
If you may be supplying fuel to pleasure craft, you should state this on your registration form. If you are already registered and you want to supply fuel for private pleasure craft, you should notify HMRC.
Responsibilities of RDCOs
Once approved as an RDCO, you have to follow certain rules, including:
- your approval will specify what you can store and where you can store it
- when supplying controlled oils, you must carry out specific checks on your customers
- you must charge additional duty (plus VAT at the reduced rate on the total amount) on supplies of red diesel to private pleasure craft
You can get a free poster from HMRC for display at your point of sale warning against illegal use of red diesel. A leaflet for customers to explain the checking procedures for controlled oils is also available.
Returns, records and payments
As an approved RDCO, you’ll have to make regular returns to HMRC, detailing all sales of controlled oils except:
- supplies in pre-packaged containers of 20 litres or less (whether you package them yourself or buy them like that)
- supplies of red diesel made to commercial vessels - there are special provisions for sales to private pleasure craft
- supplies of Avtur
If you told HMRC when you applied for approval that you’ll only be making sales covered by these exceptions, they won’t send you return forms to fill in.
Reliefs on oils and fuels
If you use certain oils for specific uses then you either won’t have to pay Fuel Duty, or you may be able to receive a repayment.
Oils not used for fuel
You might not have to pay Fuel Duty if the oil is not used for any of the following:
- to fuel an engine, motor or any other machinery
- to add to fuel for an engine, motor or other machinery
- for heating
Oils put to uses other than those listed above are ‘tied oils’, and will include:
- light oils
- heavy oils that fall into the excise definition of gas oil, fuel oil or kerosene
Remember that you need approval from HMRC before you can receive tied oils free of duty, whether you are using them or distributing them.
As an alternative to receiving oils duty-free, you may be able to seek approval from HMRC to receive repayments of duty instead.
Fuel used to generate electricity
If you use biofuels to produce electricity in a generating station or in a combined heat and power (CHP) station, you don’t have to pay Fuel Duty on them. If you use oils for the same purpose and your use meets the detailed conditions, you can apply to receive a repayment from HMRC of any duty paid on the fuel.
Aviation turbine fuel (Avtur)
You don’t have to pay Fuel Duty on Avtur you use as an aircraft fuel, provided:
- the fuel is not to be used for private pleasure flying
- all the other necessary conditions are fulfilled
You can claim relief on heavy oils (diesel) or light oils (petrol) that you use during a sea voyage if both of the following apply:
- at all times during the voyage you are either within the limits of a port or at sea, and not on any inland waterway
- the vessel is not a private pleasure craft
Depending on the circumstances, you may be able to buy your oil duty free, or you may have to claim a repayment from HMRC.
Rural Fuel Duty relief
If you are a retailer selling unleaded petrol or diesel as road fuel in the Inner and Outer Hebrides, the Northern Isles, the Islands of the Clyde and the Isles of Scilly you can claim Rural Fuel Duty relief.
You can claim a relief of five pence per litre on petrol and diesel you purchase for onward retail sale from 1 January 2012.
Rates of Fuel Duty
The table below provides details of Fuel Duty rates on all fuel types. The rates of duty are in pounds sterling per litre unless otherwise stated. The rates shown are, in some cases, net of rebates that are only given if certain mandatory requirements are complied with - eg marking, and restrictions as to use, etc.
Fuel Duty rates**
|Fuel||On and after 23 March 2011|
|Heavy oil (diesel)||0.5795|
|Avtur used for private pleasure flying||0.5795|
|Light oil (other than unleaded petrol or aviation gasoline)||0.6767|
|Aviation gasoline (Avgas)||0.3770|
|Light oil delivered to an approved person for use as furnace fuel||0.1070|
|Marked gas oil||0.1114|
|Heavy oil other than fuel oil, gas oil or kerosene used as fuel||0.1070|
|Kerosene to be used as fuel in an engine, other than in a road vehicle or for heating||0.1114|
|Biodiesel for non-road use||0.1114|
|Biodiesel blended with gas oil for non-road use||0.1114|
|Road fuel natural gas (NG), including biogas (£ per kg)||0.2470|
|Road fuel gas other than NG - eg liquefied petroleum gas (LPG) (£ per kg)||0.3161|