The UK and Ireland governments are to bring in a new product to mark rebated fuels, including the off-road diesel commonly known in the UK as ‘red diesel’, in a move that will boost both countries’ fight against illegal fuel laundering.
The marker will help HM Revenue & Customs (HMRC) and the Irish Revenue Commissioners tackle the criminal market in off-road diesel, marked with a red dye in the UK and green in Ireland, and also kerosene primarily used for heating oil.
The new marker will make rebated fuel much harder for fraudsters to ‘launder’ (i.e. remove the marker from it) and sell on at a profit. Launderers filter the fuel through chemicals or acids to remove the government marker. The chemicals and acids remain in the fuel and damage fuel pumps in diesel cars.
The marker will be produced by the Dow Chemical Company. During a joint UK and Ireland evaluation, the chosen marker was proved to be significantly more effective than the current markers, and highly resistant to known laundering techniques. It will be implemented in consultation with the oil industry and other affected sectors and will be used alongside the current marker mix.
Nicky Morgan, Economic Secretary to the Treasury, said:
I am delighted that our two countries have come together to fight the shared problem of illicit fuel. At a time when the government’s priority is cutting the deficit, it is unacceptable that criminals are cheating the system. The government has invested nearly £1 billion in HMRC to tackle avoidance, evasion and fraud.
Using illicit fuel is not a victimless crime; it robs the government of tax revenue that is used to fund vital public services and puts those businesses that follow the rules at a commercial disadvantage. It also has a severe environmental impact, with considerable clean-up costs for local councils. So we are boosting HMRC’s fight against this fraud by introducing a more robust marker, to ensure it is far harder to remove.
The use of illicit diesel is estimated to be 12 to 13% of market share in Northern Ireland and about 2% in the rest of the UK.
The use of rebated fuel is strictly limited to specific circumstances, primarily in agriculture, construction and heating. Excise duty on rebated diesel is charged at a lower rate than standard fuel duty. For UK red diesel, excise duty is charged at 11.14ppl instead of the full rate of 57.95ppl.