Motor and heating fuels used to generate electricity — relief from Excise Duty (Excise Notice 175)
Find out about relief from Excise Duty for users of fuel used to generate electricity ('Electricity Relief').
1. Overview
1.1 Information in this notice
This notice gives details of the relief from excise duty for users of heavy or light hydrocarbon oil to generate electricity (‘Electricity Relief’).
Light oil is a hydrocarbon oil where either:
- more than 89%, by volume, distils at a temperature of no more than 210°C
- it gives off an inflammable vapour at a temperature less than 23°C when tested in a way set by the Acts on petroleum
Heavy oil is any hydrocarbon oil that is not ‘light oil’.
This notice also explains the roles and responsibilities of qualified claimants.
1.2 Who should read this notice
This notice is for generators of oil based electricity in the UK, including:
- combined heat and power stations
- auto-generators
- exempt unlicensed electricity suppliers
Combined heat and power stations produce electricity or motive power that can be operated for purposes including the supply to any premises of:
- heat produced together with electricity or motive power
- steam produced from, or air or water heated by, such heat
Auto-generators and exempt unlicensed electricity suppliers are defined under section 2.7.1 of this notice.
1.3 What laws cover this notice
Primary legislation:
- Customs and Excise Management Act 1979
- The Hydrocarbon Oil Duties Act 1979
- The Hydrocarbon Oil Duties (Reliefs for Electricity Generation) Regulations 2005 (SI 2005/3320)
- The Hydrocarbon Oil Duties (Reliefs for Electricity Generation) (Amendment) Regulations 2007 (SI 2007/2191)
- The Hydrocarbon Oil, Biofuels and Other Fuel Substitutes (Determination of Composition of a Substance and Miscellaneous Amendments) Regulations 2008 (SI 2008/753)
- The Hydrocarbon Oil Duties (Reliefs for Electricity Generation) (Amendments for Carbon Price Support) Regulations 2013 (SI 2013/657)
- The Hydrocarbon Oil Duties (Reliefs for Electricity Generation) (Amendments for Carbon Price Support) Regulations 2014 (SI 2014/713)
- The Hydrocarbon Oil Duties (Consequential Amendments and Transitional Provisions) Regulations 2022 (SI 2022/234)
- The Hydrocarbon Oil Duties (Reliefs for Electricity Generation) (Amendments for Carbon Price Support) Regulations 2015 (SI 2015/943)
Secondary legislation:
- The Biofuels and Other Fuel Substitutes (Payment of Excise Duties etc.) Regulations 2004 (SI 2004/2065)
- The Biofuels and Other Fuel Substitutes (Payment of Excise Duties etc) (Amendment) Regulations 2007 (SI 2007/1640)
- The Biofuels and Hydrocarbon Oil Duties (Miscellaneous Amendments) Regulations 2007 (SI 2007/3307)
- The Hydrocarbon Oil, Biofuels and Other Fuel Substitutes (Determination of Composition of a Substance and Miscellaneous Amendments) Regulations 2008 (SI 2008/753)
- The Hydrocarbon Oil Duties (Consequential Amendments and Transitional Provisions) Regulations 2022 (SI 2022/234)
1.4 Health and Safety
You must follow the legal rules for health and safety, such as the Health and Safety at Work Act 1974. This may include the need to display warning notices and to give health and safety instructions, to both staff and visitors.
If you issue special equipment or protective clothing to your staff for activities, such as handling, inspecting or sampling fuel, then you must give us similar clothing and equipment when we do the same activities.
2. Relief scheme
2.1 Background
The Hydrocarbon Oil Duties (Reliefs for Electricity Generation) Regulations 2005 allows for a relief from fuel duty on oils used in electricity generation.
It was introduced on 1 January 2006 to make sure the tax treatment of oils used in electricity generation is broadly consistent with other energy products used for the same purpose.
To encourage investment in low carbon power generation, the government introduced a ‘carbon price floor’ from 1 April 2013. Carbon price floor is designed to give an incentive to invest in low carbon power generation by providing certainty to the carbon price in the UK electricity generation sector.
Supplies of coal and other solid fuels, natural gas and liquefied petroleum gas used in electricity generation are liable to newly created carbon price support rates of Climate Change Levy from 1 April 2013.
For oils used in electricity generation from that date, the amount of fuel duty that can be reclaimed under the Electricity Relief will be adjusted, setting effective ‘carbon price support rates’ for oils. Carbon price support rates are designed to reflect the amounts of carbon dioxide produced when the fuels are burned.
2.2 Claiming relief
Relief must be claimed by a qualified claimant — a person who causes qualifying oil to be used to either produce:
- electricity in a generating station
- outputs of a combined heat and power station
Qualifying oil is either:
- heavy oil charged with a duty of excise under section 6(1) of the Hydrocarbon Oil Duties Act 1979 on whose delivery for home use no rebate has been allowed under section 11(1), 13ZA or 13AA of that Act, or for which a payment under section 12(2) of that Act has been made
- light oil on whose delivery for home use rebate has been allowed under section 14(1) of that Act
2.3 Oils that qualify for relief
Oils used to generate electricity qualify for the relief if they:
- were put into a generator:
- before 1 April 2022 (rebated heavy oil)
- on or after 1 April 2022 (full duty paid heavy oil, or rebated heavy oil used as allowed under a licence issued by HMRC and for which a payment of the rebate is made)
- are light oil (which is rebated for use as furnace fuel)
Examples of rebated heavy oils include:
- fuel oil
- gas oil including hydrotreated vegetable oil (HVO)
- kerosene
- other heavy oils such as lubricants and recovered fuel oil
Examples of rebated light oils include naphtha or condensate.
If you’re unsure if the oil used to produce electricity qualifies for relief, contact the helpline on telephone: 0300 200 3700.
Biofuels used to generate electricity are also subject to relief from fuel duty. This is provided for by part 7 of The Biofuels and Other Fuel Substitutes (Payment of Excise Duties and etc.) Regulations 2004.
Read Biofuels and other fuel substitutes (Excise Notice 179e) to find out how to claim relief on biofuels used to generate electricity.
2.4 Form of relief
Relief is given in the form of a repayment of fuel duty to the qualified claimant.
2.5 Amount of duty that can be claimed
For generators in Great Britain (England, Scotland and Wales), the amount of relief which can be claimed is the amount of duty charged and paid on the qualifying oil used to produce electricity less an amount for carbon price support rates of fuel duty.
For generators in Northern Ireland, the amount of relief which can be claimed is the amount of duty charged and paid on the qualifying oil used to produce electricity in a generating station.
Different rules apply to combined heat and power stations, read section 3 of this notice.
2.6 Carbon price support rates for fuel duty
For Great Britain, the following rates apply.
| Fuel | Rate from 1 April 2014 to 31 March 2015 (or for kerosene 1 May 2014 to 31 March 2015) (per litre) | Rate from 1 April 2015 to 31 March 2016 (per litre) | Rate from 1 April 2016 to 31 March 2022 (per litre) |
|---|---|---|---|
| Fuel oil, other heavy oil, rebated light oil | £0.03011 | £0.05730 | £0.05711 |
| Gas oil, kerosene, rebated bioblend | £0.02642 | £0.04990 | £0.04916 |
| Fuel | Rate from 1 April 2022 (per litre) |
|---|---|
| Qualifying oil which is light oil (light oil for use as furnace fuel) | £0.05711 |
| Qualifying oil which is heavy oil other than gas oil or kerosene (on which no rebate is allowed under section 11(1) or 13ZA of the Hydrocarbon Oil Duties Act 1979, or for which a payment is made under section 12(2) of the Hydrocarbon Oil Duties Act 1979) | £0.05711 |
| Qualifying oil which is gas oil or kerosene (on which no rebate is allowed under section 11(1)(b) or 13AA of the Hydrocarbon Oil Duties Act 1979) | £0.04916 |
| Qualifying bioblend which is bioblend charged with a duty of excise under section 6AB(2) of the Hydrocarbon Oil Duties Act 1979 on whose delivery for home use no rebate is allowed under section 14B(3) of that Act | £0.04916 |
For Northern Ireland, the carbon price support rates do not apply for oils used in electricity generation, regardless of if the electricity is:
- sent to the grid
- consumed in Northern Ireland
2.7 When relief is allowed
Relief is allowed on either:
- quantities of qualifying oil used to generate electricity in a generating station
- outputs of a fully or partly exempt combined heat and power station, defined in Finance Act 2000, Schedule 6, paragraph 148 (2) and (3)
This depends on the limitations set out in section 3 of this notice.
Relief is allowed only after the oil is used to produce the electricity. Relief is not allowed on unused oil held as stock.
2.7.1 Auto-generators and exempt unlicensed electricity suppliers
No relief is allowed on qualifying oil used to produce electricity by:
- an auto-generator
- an exempt unlicensed electricity supplier
An ‘auto-generator’ is a person who produces electricity primarily for their own use. Electricity will be treated as primarily for own use when it’s not produced by:
- an electricity utility or a person treated as such for the purposes of any supplies of electricity they make
- a person who has consumed, in the preceding 3 months, less than 75% of the electricity produced in that period
An electricity utility is the holder of a licence under either:
- section 6(1)(d) of the Electricity Act 1989 (supply licences)
- article 10(1)(c) or (2) of the Electricity Supply (Northern Ireland) Order 1992
Except when the holder is acting otherwise than for purposes connected with the carrying on of activities authorised by the licence.
An ‘exempt unlicensed electricity supplier’ is a person who’s exempt from either:
- section 4(1)(c) of the Electricity Act 1989 (persons supplying electricity to premises) (the exemption is granted by an order under section 5 of that Act)
- article 8(1)(c) of the Electricity Supply (Northern Ireland) Order 1992 (the exemption is granted by an order under article 9 of that Order)
Except when they’re acting otherwise than for purposes connected with the carrying on of activities authorised by the exemption.
However, relief is allowed when electricity produced by an auto-generator or an exempt unlicensed electricity supplier is supplied to a licensed electricity supplier (or a person treated as such under the Climate Change Levy legislation). Read paragraph 2.5 for information on the amount of relief that can be claimed.
Auto-generators or exempt unlicensed electricity suppliers using combined heat and power stations should read section 3 of this notice.
2.8 How you claim relief
If you’re a qualified claimant you should submit your claims, including for combined heat and power stations, in writing.
Use form EX55 to reclaim excise duty on oils or biofuels used to generate electricity or contact our helpline on telephone: 0300 200 3700.
You should also use form EX55 to account for the carbon price support rates of fuel duty. You’ll need to:
- record the quantity of fuel used during the period of the claim
- use the right carbon price support rate for the fuel used to calculate the total carbon price support charge
This charge will then be deducted from the amount of fuel duty on which you’re claiming relief.
Send your claim and supporting documents to the HMRC Mineral Oil Reliefs Centre, by email: morcrepaymentclaimsteam@hmrc.gov.uk.
2.9 When to claim
Claims must be for a period of at least one month, but not longer than 3 years and must be made no later than 3 months after the period it relates to. Claims cannot be made for amounts less than £50.
Different rules apply to combined heat and power stations, read section 3 of this notice for further details.
2.10 Evidence you need to submit with your claim
You’ll need to include supporting documents with your claim to show that both these apply:
- you used the oil to produce electricity
- the duty has been paid and is not subject to any other:
- application
- claim for repayment
- remission
- drawback
Examples of the sort of evidence needed include:
- purchase orders
- delivery notes
- sales invoices
Other forms of evidence may be accepted.
2.11 Claiming the relief on rebated fuel used before 1 April 2022
After 1 April 2022, if your claim for relief includes rebated fuel you used before this date, you must claim at the rebated rate. This includes when you’ve used rebated fuel that was already in your generator after 1 April 2022, before the rules changed.
If you’re making a claim that includes rebated and unrebated oil, you should submit the details separately on the same EX55 claim form after you’ve entered the first set of details. You do this by clicking the ‘Add’ button at the bottom of the page.
3. Combined heat and power stations
3.1 Background
This section only applies to combined heat and power stations that:
- are assessed and certified under the Combined Heat and Power Quality Assurance (CHPQA) programme by the Department for Energy Security and Net Zero
- have an exemption certificate issued by the Secretary of State for Energy Security and Net Zero
A combined heat and power station that’s not within the Combined Heat and Power Quality Assurance programme is normally treated, about electricity, as a form of electricity generation. Combined heat and power stations within this category may be able to claim relief on fuel duty only in the circumstances set out in paragraph 2.7.1.
Self-assessment and certification under the Combined Heat and Power Quality Assurance programme is based on a methodology designed to assess the quality of a combined heat and power station and its qualification as a good quality combined heat and power station. This then sets the extent to which it’s eligible to receive fiscal and other benefits. For Climate Change Levy, for example, it will set the extent to which both the input fuel used in the combined heat and power station and the corresponding outputs (direct and self-supplies of qualifying power output electricity) are relieved of Climate Change Levy.
For full relief on input fuel, a station needs to achieve, or better, the efficiency percentage threshold of 20%. When this criterion is not met, relief from Climate Change Levy is scaled back. This is calculated by applying the ‘relevant fraction’, the ratio between a station’s efficiency percentage and the threshold efficiency percentage, to supplies made to the station. A combined heat and power station is able to claim relief on oils used to generate outputs for an annual operation scaled back to the same relevant fraction as entitlement to relief from Climate Change Levy.
Combined heat and power stations in Great Britain will also need to account for carbon price support rates of fuel duty on oil that’s referable to the production of electricity. However, from 1 April 2015 they only need to account for the carbon price support rates on oil that’s referable to electricity used on-site.
Electricity is used on-site if it’s self-supplied or supplied to a consumer by an exempt unlicensed electricity supplier.
Electricity is self-supplied when the producer makes no supply of it to another person, but causes it to be consumed in the UK. This will include the parasitic load of the combined heat and power station.
A combined heat and power station can be an exempt unlicensed electricity supplier if it qualifies under Class A or Class C of Schedule 4 of The Electricity (Class Exemptions from the Requirement for a Licence) Order 2001.
3.2 Outputs from a combined heat and power station
A combined heat and power station produces electricity or motive power that is (or may be) operated for purposes including the supply to any premises of:
(a) heat produced in association with electricity or motive power
(b) steam produced from, or air or water heated by, such heat
3.3 Amount of relief that can be claimed
If you’re a fully exempt combined heat and power station, that is to say your efficiency percentage is equal to, or exceeds the threshold efficiency percentage, the amount of relief you can claim is the amount of duty charged and paid on the qualifying oil.
If you’re a partially exempt combined heat and power station, that is your efficiency percentage is less than the threshold efficiency percentage, the amount of relief you can claim is the amount of duty charged and paid on the qualifying oil used to produce your outputs scaled back to the relevant fraction.
However, the amount of relief that can be claimed is reduced, less an amount for the carbon price support rates of fuel duty.
3.4 How to calculate your claim
You should first apply the relevant fraction to the quantity of qualifying oil or bioblend you have used during the annual operation to which the claim refers, to calculate the amount of fuel duty relief you’re claiming. Read section 3.5 of this notice.
You then need to calculate the carbon price charge for the annual operation. For the 2015 annual operation you’ll need to determine the quantity of qualifying oil or bioblend consumed between:
- 1 January and 31 March to produce electricity, read section 3.6 of this notice
- 1 April and 31 December to produce electricity used on-site, read section 3.6 of this notice
For annual operations after then you should apply the percentage of total fuels referable to the production of electricity used on-site during that annual operation to qualifying oil or bioblend oil consumed to produce outputs during that operation.
Once you have applied the carbon price support rates to these quantities and calculated the total carbon price charge, the resulting figure will then be deducted from the amount of fuel duty relief you’re claiming.
3.5 What the relevant fraction is
The relevant fraction is the fraction when the numerator is the efficiency percentage for the station, and the denominator is the threshold efficiency percentage for the relevant annual operation.
The efficiency percentage is the station’s power efficiency, as stated on its Combined Heat and Power Quality Assurance certificate. A certificate issued for a combined heat and power station, following assessment of the station against criteria set out in the Combined Heat and Power Quality Assurance.
For example, when in an annual operation, a station achieves an efficiency percentage of 15%, and the threshold efficiency percentage is 20 per cent, the relevant fraction is:
15 ÷ 20 = 75%.
3.6 How to determine the quantity of oil referable to the production of electricity
You’ll need to refer to the Combined Heat and Power Quality Assurance certificate for the annual operation to which the claim refers.
You’ll need to take the following steps:
-
Establish the quantity of input fuel used to generate electricity in the annual operation. This is calculated using one of the following equations:
For combined heat and power stations that do not produce mechanical power:
Q = TFI - (QHO ÷ 0.81)
TFI = Total Fuel Input taken from the certificate.
QHO = Qualifying Heat Output taken from the certificate.
81% is the reference boiler efficiency.
For combined heat and power stations that do produce mechanical power:
Q = (TFI – (QHO ÷ 0.81)) × (1 – (MO ÷TPO))
TPO = Total Power Output taken form the certificate.
MO is the Mechanical Output in megawatt-hours (electrical) generated by the station in a given annual operation to drive a mechanical load (such as a pump, fan or compressor) through direct coupling, without the use of electricity. You will have given this within your Combined Heat and Power Quality Assurance annual self-assessment. -
Calculate the percentage of the fuel input in the annual operation to generate electricity, by applying the equation: (Q ÷ TFI) × 100.
-
Apply this percentage to the quantity of qualifying oil and bioblend consumed to produce outputs before 1 April 2015.
3.7 How to determine the percentage of oil referable to the production of electricity consumed on-site
You’ll again need to refer to the Combined Heat and Power Quality Assurance certificate for the annual operation to which the claim refers.
You’ll need to take the following steps:
-
Find out the quantity of input fuel used to generate electricity in the annual operation. How to do this is explained in paragraph 3.5 at step 1.
-
Find out the amount (R) of fuel used in that annual operation to generate electricity that’s not qualifying electricity. This is done by applying the equation:
R = Q × (1 – (ES ÷ (TPO – MO)))
TPO = Total Power Output taken from the certificate.
ES = the electricity used on-site in the annual operation covered by the certificate. You will need to be able to demonstrate this from your business records. For the purposes of the above equation this figure cannot be greater than the Qualifying Power Output shown on the certificate.
MO is explained in paragraph 3.5. -
Calculate the percentage of fuel in the annual operation covered by the certificate used to generate electricity that’s not qualifying electricity, by applying the equation:
(R ÷ TFI) × 100. -
Apply this percentage to the quantity of qualifying oil and bioblend consumed to produce outputs on or after 1 April 2015.
3.8 Combined heat and power stations situated in Northern Ireland
The carbon price support rates of fuel duty do not apply for oils used in electricity generation in Northern Ireland, regardless of if the electricity is:
- sent to the grid
- consumed in Northern Ireland
3.9 Additional information combined heat and power stations need to supply
Combined heat and power stations need to supply a copy of their Combined Heat and Power Quality Assurance certificate and Secretary of State certificate with their claim.
A Secretary of State certificate is given by the Secretary of State under paragraph 148(4) or (5) of Schedule 6 to the Finance Act 2000.
Failure to supply the certificates may delay the processing of claims.
3.10 When combined heat and power stations should make a claim
Applications for relief must be for an annual operation and must be made no later than nine months after the annual operation to which it relates.
Claims cannot be made for amounts less than £50, nor can they be made based on the previous year’s operation. This means that duty can only be claimed after the actual performance for the year is known and certified.
4. Dealing with HMRC
4.1 Visits by HMRC
We may wish to inspect any generating station or combined heat and power station in which a qualified claimant has used oil to produce electricity. We’ll normally make an appointment to see you and we’ll try to make our visit with as little disruption to your business as possible.
When we make our appointment we’ll tell you:
- who we want to see
- what records we want to see
- how long we think that the visit will take
4.2 Officers’ powers
HMRC officers may:
- inspect any generating station or combined heat and power station in which qualifying oil is used to produce electricity under The Hydrocarbon Oil Duties (Reliefs for Electricity Generation) Regulations 2005
- require the production of your business records and remove or take copies of those records under the Customs and Excise Management Act 1979, section 118B
Read Revenue Traders (Accounts and Records) Regulations 1992 for more information.
4.3 Penalties
If you make a false declaration or claim for relief you could be liable to a financial penalty.
4.4 If you disagree with a decision
If you disagree with our decision, you may be able to:
- have a review
- appeal to an independent tribunal
If so, we’ll offer you a review in our decision letter and tell you about your right of appeal. If you accept the review offer, but do not agree with the review conclusion you’ll still be able to appeal to the independent tribunal.
Find out more about HMRC’s review and appeal procedures.
Your rights and obligations
Read the HMRC Charter to find out what you can expect from us and what we expect from you.
Help us improve this notice
If you have any feedback about this notice, write to:
HM Revenue and Customs
Excise Fuel Duty Policy
4th Floor East
Trinity Bridge House
2 Dearmans Place
Salford
M3 5BS
Email: oils.policymail@hmrc.gov.uk
This address is not for general enquiries.
You’ll need to include the full title of this notice. Do not include any personal or financial information like your VAT number.
If you need general help with this notice or have another question, contact the HMRC Excise Helpline on 0300 200 3700 or email the Mineral Oil Reliefs Centre at morc.exciseenquiries@hmrc.gov.uk.
Putting things right
If you’re unhappy with HMRC’s service, contact the person or office you’ve been dealing with and they’ll try to put things right.
If you’re still unhappy, find out how to complain to HMRC.
How we use your information
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Last updated 8 February 2024 + show all updates
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Hydrotreated vegetable oil (HVO) has been added as an example of rebated heavy oils. The Department for Business, Energy and Industrial Strategy (BEIS) has been changed to the Department of Energy Security and Net Zero (DESNZ). Contact details for the Mineral Oils Relief Centre have been updated.
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We have added a link to the contact details for the HMRC Mineral Oil Reliefs Centre in section 2.8.
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This notice has been updated to reflect the changes to the use of rebated fuels in the Hydrocarbon Oil Duties Act 1979 and the change to the definition of fuel qualifying for relief under the Hydrocarbon Oil Duties (Reliefs for Electricity Generation) Regulations 2005. We have updated sections 2.3 and 2.11.
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First published.