Notice

Excise Notice 554: fuel used in private pleasure craft and for private pleasure flying

Updated 16 August 2017

Foreword

This notice cancels and replaces Notice 554 (February 2013).

1. Introduction

1.1 What is this notice about?

This notice gives information and guidance on procedures to be followed for the charging and collection of Excise Duty on fuel used:

• in private pleasure craft
• for private pleasure flying

These procedures were introduced with effect from 1 November 2008.

1.2 Why were these procedures introduced?

The UK held derogations from the Energy Products Directive (EPD) (2003/96) which permitted the use of reduced and exempt rates of duty for fuel used in private pleasure craft and for fuel used in private pleasure flying. These derogations expired on 31 December 2006. These changes were required in order to comply with European legislation.

Changes required to the treatment of fuel derived from waste oils reused as a fuel, either directly or following a recycling process, following expiry of a further derogation from the EPD, also introduced from 1 November 2008, are not dealt with in this notice. Recoverers and recyclers of waste oil should read Excise Notice 179: motor and heating fuels - general information and accounting for Excise Duty and VAT.

The contact number in paragraphs 5.3 and 13.4 has been updated.

1.3 What’s changed?

From 1 September 2014 following two decisions of the Court of Justice of the European Union in the case C-79/10 Helmholtz GMBH and case C-250/10 (Haltergemeinschaft), the scope of the fuel duty exemption has been more narrowly defined. Previously, the fuel used for corporate jets, helicopters and/or marine vessels to transport staff for their business activity has been treated as exempt. However, these two rulings make clear that this activity falls into private pleasure use when there is no consideration for the transportation services provided to staff.

The UK definition will now follow the rulings in these 2 cases, as the UK takes its definition of private pleasure from the EPD. HM Revenue and Customs (HMRC) has amended this notice to ensure that our definition is in line with this. See section 9 and section 16.

1.4 Who should read this notice?

This notice is intended for:

• Registered Dealers in Controlled Oil (RDCOs) who supply red diesel and/or bioblend for use in private pleasure craft
• RDCOs who supply aviation turbine fuel (Avtur) for private pleasure flying
• users and purchasers of fuel for private pleasure craft
• users and purchasers of Avtur for private pleasure flying

1.5 What law covers this notice?

The primary law can be found in the Hydrocarbon Oils Duties Act 1979 as amended by the Finance Act 2008 and 2012.

This Act also provides for the following secondary legislation - The Hydrocarbon Oil and Bioblend (Private Pleasure-flying and Private Pleasure Craft) (Payment of Rebate etc) Regulations 2008 (SI 2008 No 2599), The Hydrocarbon Oil (Registered Dealers in Controlled Oil) Regulations 2002 (SI 2002 No 3057).

Nothing in this notice changes the law.

1.6 Are there any other relevant notices?

Excise Notice 192: Registered Dealers in Controlled Oils
Excise Notice 179: motor and heating fuels - general information and accounting for Excise Duty and VAT
Excise Notice 179A: Aviation turbine fuel (Avtur)
Excise Notice 263: marine voyages - relief from fuel duty
Excise Notice 172 Excise Duty drawback - ships and aircraft stores

2. Private pleasure craft

2.1 Position up to 31 October 2008

The most common fuel used in boats is rebated gas oil, known as ‘red diesel’ because of the requirement that the fuel is marked. This bears a much lower rate of duty than Sulphur-free Diesel (SFD), sometimes referred to as ‘white diesel’. The use of rebated red diesel in private pleasure craft was permitted by virtue of the derogation to the EPD.

Petrol is also used in boats, but is liable to the same rate of duty as if used in road vehicles.

2.2 Changes introduced on 1 November 2008

From 1 November 2008, fuel purchased for propelling private pleasure craft can no longer benefit from a reduced rate of duty but is subject to duty at the full rate.

Unmarked SFD can be used, alternatively marked gas oil, including marked SFD and marked bioblend (a mix of diesel and biodiesel), may continue to be used, but an amount equal to the rebate must be paid on the fuel used for propelling the boat.

Marked gas oil at the rebated rate may continue to be used for purposes other than propulsion such as for heating, lighting and powering appliances such as fridges.

There’s no change to the duty treatment of petrol in private pleasure craft as this is already subject to the full rate of duty.

There’s no change to the duty treatment of supplies to commercial craft which can continue to use marked gas oil at the rebated rate of duty, without the need for a written declaration, and which in the case of qualifying marine craft can continue to claim a full refund of duty under Marine Voyages Relief, see Excise Notice 263: marine voyages - relief from fuel duty.

2.3 Outline of scheme

It’s illegal to use marked gas oil for propelling pleasure craft unless the purchaser of the fuel declares that is their intent and pays the full rate of duty on it.

RDCOs who supply marked gas oil to private pleasure craft are responsible for charging the full rate of duty on fuel declared for propulsion, paying the duty collected to HMRC and for retaining the declarations made by their customers.

Rates of duty are available from the GOV.UK website or the HMRC Excise Helpline.

3. Suppliers of marked gas oil for use in private pleasure craft

3.1 Registration of suppliers

As marked gas oil is a controlled oil, all suppliers must be registered as a RDCO.

Not all RDCOs supply fuel for use by private pleasure craft but if you do, or may do in the foreseeable future, you must notify HMRC. RDCOs who supply marked gas oil to private pleasure craft must be registered with HMRC in order to charge and collect the duty and to receive a payment return.

If you’re registering as a new RDCO you will be asked to declare on the RDCO registration form whether you supply marked gas oil to private pleasure craft.

If you start supplying after you’ve registered you must contact:

HMRC
RDCO
BP4002
Benton Park View
Longbenton
Newcastle upon Tyne
NE98 1ZZ

HMRC will send you a new RDCO registration certificate showing that you’re a supplier of fuel to private pleasure craft. You will also receive a payment return towards the end of the accounting period (see paragraph 5.1).

3.2 How do I know whether or not to charge duty?

In many cases it may be clear whether the supply you’re making is for commercial purposes or for private pleasure use, for example, when supplying regular customers.

(i) Supplies for commercial use

There’s no change to procedures for supplying fuel for commercial use.

You’re not required to ask customers to produce documentary evidence to prove their status as commercial or private.

(ii) Supplies to pleasure craft

You’re not responsible for ascertaining whether the fuel you sell to an individual is for the propulsion of a private pleasure craft, it’s the purchaser’s responsibility to do so and to make a declaration to that effect.

3.3 Why does a declaration need to be made?

The law requires that a declaration must be made by the person purchasing marked gas oil if it’s to be used for propelling a private pleasure craft. The purchaser declares the proportion of marked gas oil that is to be used for propulsion.

3.4 What is the declaration?

At the time of supply the purchaser must declare in writing the amount of fuel being purchased for propulsion purposes.

Until 31 March 2012 the declaration had to be in the following format:

‘I declare that ( )% of the fuel purchased will be used for propelling a private pleasure craft’.

From 1 April 2012 legislation was changed to make clear that the use of red diesel with full duty paid for propelling private pleasure craft is permitted under UK national legislation within UK waters. When red diesel is used outside UK waters it will be subject to any prohibitions and restrictions that apply in the waters of the member state or country in whose waters it is used.

The declaration was changed to reflect the new legislation and to ensure that users were aware of the position. From 1 April 2012 the declaration is to be in the following format:

‘I declare that ()% of the fuel purchased will be used for propelling a private pleasure craft.

I am aware that the Hydrocarbon Oil Duties Act 1979, which permits the use of marked diesel to propel private pleasure craft, only applies within UK waters. I acknowledge that nothing in that Act, or the making of this declaration, affects any restrictions or prohibitions that may apply to the use of fuel for propelling private pleasure craft outside UK waters, including any restrictions or prohibitions under the law of another member state that apply within the waters of that member state.’.

It must be signed and dated by the purchaser. You must also ensure that the name and address of the purchaser is noted in your records.

There’s no standard form, but you must retain the declaration with your normal business records. It’s up to you to incorporate the declaration into your records in the most appropriate way. It may, for example, be printed onto invoices or receipts, or it may be that the required information is noted on a separate piece of paper.

If you make regular supplies to the same customer then you don’t need to obtain a declaration every time you make a supply. You must ensure that there’s a clear audit trail in your records between this declaration and each purchase made by the declarant. A single declaration can be considered valid for up to 12 months. However, this presumes that the percentage of fuel used for propulsion remains constant during that period. The declarant will have to make a new declaration if they think that the percentage of fuel used for propulsion has changed (see paragraph 4.2).

3.5 What happens to the declaration if the supply is at an unmanned pump where payment is by credit/debit card?

If you supply fuel at unmanned pumps and the purchase is made electronically by debit or credit card, you must also make provision for customers to make a declaration, either electronically, as part of the automated process of buying their fuel, or by some separate means. You must also ensure that their name and address is provided and is retained in your records.

With regard to the latter, for example, many suppliers who operate unmanned pumps hold account customer information centrally. In these circumstances, the user may make a single declaration, as per the arrangements for regular customers (see the last paragraph of 3.4). There must be a clear audit trail between the centrally held declaration and fuel transactions made by the account holder/customer.

3.6 What if I think the boat is a pleasure craft but the purchaser refuses to sign a declaration?

If a customer insists that they’re commercial you may supply them at the fully rebated rate and they’re not required to complete a written declaration. However, any doubts you may have as to their commercial status should be noted in your records.

If a customer fails to make a declaration at the time of supply, you should remind them of the obligation to make one in respect of private pleasure craft. They can then make an informed decision as to whether a declaration is required and advise you of that.

If a customer refuses to make a declaration (even a verbal statement that they are commercial), we would expect you to exercise your RDCO duty of care and refuse to supply the fuel until they indicate their status as commercial or private. If they say they’re commercial, supply as above. If they insist they’re private but unwilling to make a written declaration you should refuse to supply the fuel unless they do so.

You’re not responsible if a purchaser makes a false declaration.

See paragraph 3.8 below if the customer claims that all of the fuel is for non-propulsion purposes.

3.7 How do I know how much fuel is being used for propulsion as opposed to non-propulsion use?

It’s the purchaser’s, not the supplier’s, responsibility to declare the proportion of fuel used for propelling the craft. It’s your responsibility to charge the correct amount of duty and VAT on the supply, see section 6.

The method of apportionment introduced under this scheme may only be applied to supplies of marked gas oil, not to supplies of other fuels, such as white diesel or petrol.

3.8 What if a private user claims 100% is used for non-propulsion purposes?

In recognition of their status, residential boat owners, whose primary, or often their only, place of residence is their boat, are allowed to purchase all of their fuel at the rebated rate. If a private user claims such status and claims that 100% of their fuel is for purposes other than propulsion, then you may supply the fuel without charging any additional duty and without a declaration, but you should note your records accordingly. See paragraph 4.7 for more information.

If you have any reason to doubt the validity of the status being claimed then you should note your records to that effect.

3.9 What records must I keep?

In addition to your normal records required as an RDCO you must retain the declarations made by private users.

You must also keep a record of the amount of duty that you’ve charged and collected and there must be a clear audit trail between the declaration, the duty collected and the duty paid.

These records must be retained for the statutory 6 years from the date of the transaction.

3.10 How do I calculate the duty due?

Duty on marked gas oil is partially rebated. The amount to be charged (the relevant rebate in the formula below) is equal to the difference between the full duty rate and the rebated rate which has already been paid. In order to charge the correct rate of duty you must do the following calculation:

Quantity in litres × rate of the relevant rebate at the time of supply.

VAT is to be charged in addition at the appropriate rate. Guidance can be found in VAT Notice 701/19: fuel and power.

The proportion split between propulsion and non-propulsion usage will vary, but the following example assumes a 60% (propulsion) and 40% (non-propulsion) split for a purchase of 100 litres of red diesel. For the purpose of the example the price of marked gas oil, before additional duty, is a notional 70 pence per litre (ppl), on which duty has already been paid at the rebated rate of 11.14 ppl. No further duty is due on the 40% for purposes other than propulsion, but on the 60% for propulsion the duty due is the difference between the rebated rate of 11.14 ppl and the full rate of 57.95 ppl, that is 46.81 ppl. VAT at the reduced rate is due on the full price:

Propulsion calculation (that is, 60%)

60 litres @ 0.70ppl = £42
60 litres @ 46.81ppl = £28.08 (additional duty payable to HMRC)
VAT @ 5% = £3.50
Propulsion Total = £73.58

Non-propulsion calculation (that is, 40%)

40 litres @ 0.70ppl = £28
VAT @ 5% = £1.40
Non propulsion Total = £29.40
Transaction Total = £102.98

Duty rates can change from time to time, in particular following announcements in the Budget and Autumn Statement, and RDCOs should note their responsibility to identify and apply any changes from their effective date. That means that the new rates of duty must be accounted for and charged to your customers even if you’re supplying fuel which you bought in before the rates changed.

Information on Excise Duty and VAT rates is available from the GOV.UK website or from the HMRC Excise Helpline.

3.11 What happens if I sell my business, cease to trade or stop supplying marked gas oil to private pleasure craft?

You must notify the Mineral Oils Relief Centre (MORC) in writing of any changes no longer than 30 days after the date of the change. For further information see Excise Notice 192: Registered Dealers in Controlled Oils. The address of MORC is:

HMRC
RDCO
BP4002
Benton Park View
Longbenton
Newcastle upon Tyne
NE98 1ZZ

4. Purchasers of marked gas oil for use in private pleasure craft

4.1 What is the declaration and how do I make it?

When you purchase marked gas oil you must declare the amount that will be used to propel your boat in order for the supplier to calculate and charge you the appropriate duty. This is because only marked gas oil used for propelling pleasure craft is subject to the full duty rate and that used for non-propulsion purposes can still benefit from the reduced rate. However, a declaration is still required even if all of the fuel is going to be used for propulsion purposes.

Until 31 March 2012 the declaration had to be in the following format:

‘I declare that ()% of the fuel purchased will be used for propelling a private pleasure craft’.

From 1 April 2012 legislation was changed to make clear that the use of red diesel with full duty paid for propelling private pleasure craft is permitted under UK national legislation within UK waters. When red diesel is used outside UK waters it will be subject to any prohibitions and restrictions that apply in the waters of the member state or country in whose waters it is used.

The declaration was changed to reflect the new legislation and to ensure that users were aware of the position. From 1 April 2012 the declaration is to be in the following format:

‘I declare that ()% of the fuel purchased will be used for propelling a private pleasure craft.

I am aware that the Hydrocarbon Oil Duties Act 1979, which permits the use of marked diesel to propel private pleasure craft, only applies within UK waters. I acknowledge that nothing in that Act, or the making of this declaration, affects any restrictions or prohibitions that may apply to the use of fuel for propelling private pleasure craft outside UK waters, including any restrictions or prohibitions under the law of another member state that apply within the waters of that member state.’.

You must sign and date the declaration and also provide your name and address to the supplier.

Use of marked gas oil in your boat without making a declaration will render you liable to a civil penalty under section 9 of the Finance Act 1994 (civil penalties).

4.2 Do I have to make a declaration every time I buy marked gas oil?

If you’re a regular customer to a supplier you may make a single declaration covering all of your purchases with that supplier for up to a year, provided the percentage declared is an accurate reflection of your intended usage for propulsion over the period concerned. You’ll have to renew your declaration at least once a year.

You’ll also have to make a new declaration if the percentage use changes, for example, the percentage for non-propulsion use may increase if you use your boat during the winter months.

4.3 How do I work out the proportion of fuel used for propulsion?

We recognise that the declaration made by you will be an estimate but you must make every effort to ensure it’s as accurate a reflection of your usage as possible.

Analysis by both the industry and HMRC suggests that a split of 60% for propulsion and 40% for other use probably reflects most people’s fuel use and it’s therefore likely that many users will declare such an apportionment. This will make it easier for suppliers (RDCOs) to work out the additional duty and VAT. However, where you know that your propulsion use may be more or less than the above apportionment split or a craft clearly has no non-propulsion fuel use, then you must declare your actual intended usage.

The method of apportionment introduced under this scheme may only be applied to supplies of red diesel, not to supplies of other fuels, such as white diesel or petrol.

4.4 What if I operate a boat club or hire, lease or lend boats to third parties?

Boat clubs and hire companies, such as those who offer boating holidays, may ‘self-declare’ on behalf of the person hiring/using the boat, if they can’t reasonably be expected to estimate the proportion of fuel which may be used for propulsion during the period of hire. We accept that the club/company/owner of the vessel may be better placed to know this and make an accurate declaration on their behalf.

The owner may simplify the system of declarations for each boat and period of hire, in the same manner as described at paragraph 4.2, provided there’s a clear audit trail between the hire contract and the fuel provided to the customer during the period of hire.

The owner may account for the duty due on behalf of the customer/club member or charge them duty at each fuel supply transaction, depending on the circumstances of the hire, for example, many holiday vessels are hired for a one-off payment which includes the cost of fuel to be used during the hire period, so duty should be factored into that price.

4.5 Do I have to keep a copy of the declaration?

You’re not required to obtain or retain evidence that you’ve made a declaration and paid duty on fuel you purchased for propulsion, but doing so will facilitate any checks HMRC, or the relevant authorities in other EU member states make, to ensure that the fuel has had duty paid at the appropriate rate.

4.6 What if I have two separate tanks, one for propulsion and one for purposes other than propulsion?

Provided that the tank for non-propulsion use isn’t connected to the engine and in no way can be used to propel the craft, you can claim all fuel delivered into that tank as non-propulsion and pay the fully rebated rate. If it may be used for propelling the craft, then you must adhere to the new arrangements and declare actual usage for propulsion.

If you subsequently take fuel from a separate tank to propel the craft you may be subject to a civil penalty.

4.7 I am a residential boat owner and only move my boat a short distance occasionally

We recognise that there are boat owners whose primary, or only, residence is their boat. Some of these will be at fixed moorings or move just a very short distance along the tow path from permanent moorings. If you live aboard your craft permanently and hold certain documentation, such as a Houseboat Licence, Residential Mooring Licence, Council Tax bill in respect of the mooring, or other documentation, such as invoices or bills which provide proof of permanent residency, you may purchase all your fuel at the rebated rate (as if you owned a commercial vessel). You are not required to make a declaration.

However, it will be your responsibility to ensure that you hold the requisite documentation should we wish to check this at a future date.

4.8 I am a continuous cruiser

If you’re a ‘continuous cruiser’ you may not claim all of your fuel for non-propulsion purposes under the arrangements for residential boat owners. Even if you reside permanently on your craft, you must declare your actual intended usage for propulsion.

4.9 I am a boat builder/dealer

Many boat builders/dealers are not registered RDCOs but have their vessels filled by a third party supplier who’s a registered RDCO, prior to delivery to the customer.

This one-off supply is treated as part of taking title to the vessel, rather than a separate supply of fuel. Therefore, builders and dealers who operate on this basis don’t need to register as an RDCO or ask their customer for a declaration and additional duty.

The third party fuel supplier (RDCO) doesn’t need to account for additional duty and may continue to supply red diesel for these purposes at the fully rebated rate of duty.

This applies to new build and resale boats sold with a full tank of red diesel to private customers.

4.10 What if I make an incorrect declaration?

If you purposely make a declaration which you know to be incorrect you may be subject to a civil penalty, (see section 6).

However, it’s accepted that declarations will necessarily be based upon an estimate of intended usage and that this may not in every instance reflect actual usage. Provided you’ve made every effort to accurately estimate your intended usage we will not apply a civil penalty.

5. Returns and payments

5.1 Returns and due dates

As a registered supplier of fuel to private pleasure craft you’ll be required to submit a payment return form HO107, separate from and additional to your usual RDCO returns. The payment return will show your RDCO registration number and you’ll be asked to declare the total amount of duty due, which you will have collected. Sign and date the form and return it to:

HMRC Cumbernauld
Cumbernauld Accounting Team
St Mungo’s Road
Cumbernauld
G67 1YZ

When you register as an RDCO you’ll be asked to indicate on the registration form whether or not you wish to submit payment returns annually or quarterly and the month of the year end or the first quarter end. This will allow you to choose a period that suits you, for example, to coincide with your normal RDCO accounting period or financial year end.

If you sell your business or cease to trade you will receive a final payment return for the period up until you cease trading.

You’ll have 21 days following the end of the accounting period to send the return to HMRC and to pay the duty.

The return will show your RDCO registration details and a box for completion showing the total amount of duty collected in the period. You must also sign and date the return. You must complete and return the form even if you have made no supplies in the accounting period and you have no duty to pay.

5.2 Stagger change

If you wish to change your payment period you should address your request to:

HMRC
RDCO
BP4002
Benton Park View
Longbenton
Newcastle upon Tyne
NE98 1ZZ

5.3 Payment methods

Payment by direct debit is not available. You may pay either by credit transfer or by cheque. Please indicate which method of payment you’re using by ticking the appropriate box of the payment return.

Credit transfer by Bacs or CHAPS

Our preferred method of payment is electronically. To pay by this method please phone HMRC on 03000 583 946 who will supply you with our bank account details. When making payment please quote your RDCO registration number. This will enable us to identify your payment on our bank statement.

Note: this number is to be used only for the bank account details. All other enquiries are to be addressed to the HMRC Excise Helpline. Written enquiries should be sent to: intenquiries@hmrc.gsi.gov.uk.

Customs, International Trade and Excise Enquiries
HMRC
Crownhill Court
Tailyour Road
Plymouth
PL6 5BZ

You must still submit your Payment Return (H0107) to the following address:

HMRC Cumbernauld
Cumbernauld Accounting Team
St Mungo’s Road
Cumbernauld
G67 1YZ

You must arrange to transfer the necessary funds by the 21st day immediately following the end of the accounting period to which the return relates. When this falls on a weekend or bank holiday you must arrange for payment and submit the return by the last working day prior to this.

(ii) Cheques

Cheques should be crossed and made payable to ‘HM Revenue and Customs’ and sent in with your payment return to reach us by the due date, that is the 21st day following the end of the accounting period. When this falls on a weekend or bank holiday the cheque must be received by the last working day prior to this. Please write your RDCO registration number on the back of the cheque.

The return and payment should be sent to:

HMRC Cumbernauld
Cumbernauld Accounting Team
St Mungo’s Road
Cumbernauld
G67 1YZ

6. Penalties

Situations where a civil penalty under section 9 of the Finance Act 1994 may be imposed include failure by:

• users to make a declaration that the marked gas oil is intended to be used as fuel for propelling private pleasure craft
• users to make complete and accurate declarations
• suppliers to render returns and payments by the due date
• suppliers to make complete and accurate returns

Penalties of £250 or 5% of the duty due (whichever is greater) and where appropriate daily penalties of £20 after the due date that payment of duty remains outstanding may be imposed for each contravention.

7. Assessments

The Commissioners of Revenue and Customs have the powers to assess the amount of duty due where a supplier fails to pay the duty to HMRC. A civil penalty may also be issued (see section 6).

8. Reviews and appeals

The above sanctions are subject to the appeal provisions contained in the Finance Act 1994. If we impose any of these sanctions we will notify you at the same time about the review procedure and your rights of appeal, which you may make to an independent tax tribunal.

9. Definition of private pleasure craft

‘Private pleasure craft’ is defined in the EC Council Directive 2003/96, known as the Energy Products Directive, as:

‘Any craft used by its owner or the natural or legal person who enjoys its use either through hire or through any other means, for other than commercial purposes and in particular other than for the carriage of passengers or goods or for the supply of services for consideration or for the purposes of public authorities.’

For the purposes of the relevant provisions of the Hydrocarbon Oil Duties Act 1979 (the primary legislation that governs the levying of duty on fuel oil in the UK) ’private pleasure craft’ has the same meaning as in the Energy Products Directive.

The definition of ‘private pleasure craft’ is different from the definition of ‘pleasure vessel’ used in UK legislation such as regulations made under the Merchant Shipping Act 1995, including the Merchant Shipping (Vessels in Commercial Use for Sport or Pleasure) Regulations 1998.

The definition of ‘pleasure vessel’ is narrower than that of ‘private pleasure craft’ so it’s likely that some craft that are not ‘pleasure vessels’ for the purposes of the Merchant Shipping (Vessels in Commercial Use for Sport or Pleasure) Regulations 1998 and therefore have to comply with the relevant Code of Practice will nevertheless still be ‘private pleasure craft’ for the purpose of purchasing fuel.

In most cases it will be clear whether a craft is being used for private pleasure purposes, for example, privately owned yachts, motor boats or canal boats. Likewise, the bareboat hire or leasing of such boats from a commercial body, for example for holidays, is classed as private pleasure usage.

However, we accept that some arrangements may be difficult to classify, so we have provided the following broad guidance. The following isn’t a definitive list but are examples of what we consider are likely or unlikely, to be private pleasure use:

Bareboat charter: likely to be regarded as a private pleasure craft, whatever the means of payment, if any.

Skippered charter: unlikely to be regarded as a private pleasure craft if the owner/charter company provides a skipper, as this may equate to the carriage of passengers for consideration.

Training courses: unlikely to be a private pleasure craft, as this may equate to the supply of services for consideration.

Yacht delivery: unlikely to be a private pleasure craft if the delivery is by professional crew on behalf of a yacht manufacturer, distributor or charter company; otherwise, likely to be a private pleasure craft.

Club yacht used by members* - likely to be a private pleasure craft.

Club committee boat* - likely to be a private pleasure craft.

Club safety boat* - likely to be a private pleasure craft, although a coastal club may be entitled to reclaim the duty in accordance with Notice 263 marine voyages - relief from fuel duty.

Club launch* - likely to be a private pleasure craft.

*Many of these craft fall within the definition of ‘pleasure vessel’ for the purposes of the Merchant Shipping (Vessels in Commercial Use for Sport or Pleasure) Regulations 1998 and don’t need to comply with the applicable Codes of Practice. As such, it is likely that they would also be regarded as ‘private pleasure craft’ for the purposes of purchasing fuel.

Where you have any doubts you should seek a definitive ruling from us. You can do this by writing with full details of the type of vessel and the circumstances of its use to the HMRC Excise Helpline.

Transportation of staff in corporate yachts: if you transport your staff on corporate yachts to attend a business meeting or trade fair, the fuel duty exemption will no longer be applicable as this is now considered to be private pleasure. A company using its own yachts to transport its own staff is not providing a service for consideration.

10. Private pleasure flying

10.1 Position up to 31 October 2008

Two main fuels are used in aviation: Avtur which is used in commercial jet and turbo-prop aircraft and aviation gasoline (avgas) which is used mainly in small piston-engined aircraft. Helicopters use both Avtur and avgas. Some micro-light aircraft can fly on unleaded petrol.

Until 31 October 2008 all Avtur, which is an unmarked type of kerosene, was fully rebated to a nil rate of duty. All avgas was subject to a reduced duty rate which was set at half of the leaded petrol rate whether it was used for commercial or private pleasure use.

11. Changes introduced on 1 November 2008

The expiry of the derogation gave rise to the requirement to charge the full rate of duty on fuel used for private pleasure flying and led to changes in the treatment of both Avtur and avgas.

Unleaded petrol used in private pleasure flying is not affected as it was already subject to duty at the full rate as used in road vehicles.

11.1 Avtur

Avtur is a type of kerosene subject to the same full rate of duty for heavy oil used in road vehicles. Kerosene supplied for use other than as road fuel contains fiscal markers and qualifies for a full rebate of duty. Avtur also qualifies for a full rebate, but for safety reasons is supplied under a marking waiver.

11.2 Outline of scheme

Users of Avtur for private pleasure flying are required to pay ‘an amount equal to the rebate’, which we shall refer to as ‘duty’, to HMRC. At the time of purchase, the user will be asked to make a declaration if the fuel is to be used for private pleasure flying and acknowledge the obligation to pay the duty. The supplier will retain the declaration. The user will have at least 30 days to pay the duty to HMRC.

12. Suppliers of Avtur

12.1 Duty of care

Avtur is a controlled oil and all suppliers of Avtur are registered as RDCOs. As an RDCO you have a general duty of care to ensure that you only make supplies to customers who have a legitimate use for that oil. That duty of care was extended from 1 November 2008 to include an obligation to draw to the attention of the purchaser the requirement to pay the duty to HMRC, if you think that the Avtur you’re supplying might be used for private pleasure flying.

If the purchaser states that the fuel will be used for private pleasure flying then you’re required to obtain a signed and dated declaration from the purchaser to that effect and retain it with your records for future inspection by HMRC. If the purchaser states that it’s not for private pleasure flying then you must note your records to that effect.

You’re not responsible for paying the duty to HMRC.

12.2 What declaration must the supplier ask the purchaser to make?

The wording of the required declaration is:

‘I declare that some or all of the kerosene purchased is to be used for private pleasure flying. I am aware that, on the quantity of kerosene used for private pleasure flying, I have a legal obligation to pay to HMRC an amount equal to the rebate allowable on a like quantity of kerosene at the time of this declaration.’

It must also show the name and address of the declarant who must sign and date it.

It’s up to you how you incorporate the declaration into your records, for example, it may be included on a sales invoice, but you must ensure that the name and address of the purchaser is also noted in your records and that the purchaser signs and dates the declaration.

The declaration may also be made on plain paper as long as all the required information is noted, see paragraph 13.4.

12.3 Do suppliers have to ask all purchasers how the fuel is going to be used - that will cause a lot of extra work?

Some supplies will be clearly for commercial/business purposes and many suppliers will also know their regular customers. It’s only if in doubt, or where the fuel is clearly for pleasure flying, that you need to ask for a declaration.

12.4 What extra records must the supplier keep?

You must retain the declarations. You must note your records if you’ve queried the use of the fuel and the purchaser has declined to make a declaration for private pleasure use stating that it is for business/commercial purposes.

13. Users of Avtur for private pleasure flying

Users of Avtur are responsible for paying the duty to HMRC.

13.1 What is the declaration and how do I make it?

When you purchase Avtur you may be asked by the supplier if it’s to be used for private pleasure flying. If that’s the case you’ll be asked to make the following written declaration:

‘I declare that some or all of the kerosene purchased is to be used for private pleasure flying. I am aware that, on the quantity of kerosene used for private pleasure flying, I have a legal obligation to pay to HMRC an amount equal to the rebate allowable on a like quantity of kerosene at the time of this declaration.’

You’ll be asked to record your name and address and to sign and date the declaration. The supplier will retain the declaration in his records.

Use of Avtur for private pleasure flying without making a declaration, or failing to pay the duty due, will render you liable to a penalty.

13.2 Do I have to make a declaration every time I purchase Avtur for private pleasure flying?

Yes.

13.3 What if somebody else, such as a maintenance company, purchases the fuel for me?

If somebody else purchases fuel for you, for example if you employ a maintenance company to look after your plane including filling it with fuel, there are two options. You can either:

(i) provide a declaration to be given to the fuel supplier when the fuel is purchased and you’ll have an obligation to pay the duty

(ii) you can authorise the maintenance company to complete the declaration and pay the duty on your behalf - you will still need to inform them how much of the fuel is to be used for private pleasure purposes in order for them to calculate the duty due.

13.4 How do I pay the duty due?

A payment form HO105 Fuel Duty: payment of duty on aviation turbine fuel used for private pleasure flying is available from the GOV.UK webiste and HMRC Excise Helpline. This can be used to accompany payment of the duty on either single or multiple purchases within the same month. If you only make an occasional purchase you may choose to pay the duty on that purchase straightaway. However, if you make several purchases within the same month then you should declare them on one form and pay the total duty due in one transaction.

Use of the form is not obligatory as long as all the information on it is supplied at the time the payment is made. The information may, for example, be provided on plain paper so long as it is headed ‘Payment of Duty on Avtur used for private pleasure flying’. The information required is:

• your name and address
• the quantity of Avtur purchased per transaction
• date of each purchase
• name and address of supplier for each purchase
• rate of rebate/duty for each purchase
• total duty due

and the following declaration must be noted:

‘I declare that the information provided is true and complete’ and it must be signed and dated by the declarant.

Payment may be made either by cheque, which should be crossed and made payable to ‘HM Revenue and Customs’, or by electronic transfer, Bacs or CHAPS. Payment by Direct Debit is not available. If payment is to be made electronically you must phone HMRC on 03000 583 946 in order to obtain a unique reference number and the bank account details into which payment is to be made.

Note: this number is to be used to obtain a unique reference number and the account details only. All other enquiries are to be addressed to the HMRC Excise Helpline. Written enquiries should be sent to: intenquiries@hmrc.gsi.gov.uk.

Customs, International Trade and Excise Enquiries
HMRC
Crownhill Court
Tailyour Road
Plymouth
PL6 5BZ

The form (or required information), along with payment, if by cheque, is to be sent to:

HMRC Cumbernauld
Cumbernauld Accounting Team
St Mungo’s Road
Cumbernauld
G67 1YZ

13.5 When do I pay?

You must pay the duty no later than 30 days after the end of the calendar month in which the declaration was made and the fuel was purchased. If the 30th day is not a normal working day but falls at a weekend or bank holiday then payment must be made no later than the last working day prior to this.

If you make only an occasional purchase you may prefer to pay the duty straightaway rather than wait until the end of the month. However, if you make more than one purchase in a month you should make one payment, and submit one form, covering the total purchases in the calendar month concerned.

13.6 Where do I find the rates of duty?

The rate of duty is that applicable to kerosene used as a motor fuel, so the full heavy oil rate. Rates of duty are subject to change at Budget or other times and it is your responsibility to ensure that you use the correct rate of duty. Information on current Excise Duty rates is available from our website or from the HMRC Excise Helpline.

13.7 What if I use my plane/helicopter for both business/commercial as well as for private use?

When you purchase the fuel you must declare at the time of purchase if some or all of the fuel is to be used for private pleasure flying.

If fuel is to be used for both purposes you will have to estimate the amount of fuel used for pleasure flying and on which duty must be paid and declare it on the payment form.

13.8 What if I buy fuel intending to use it for business purposes but subsequently use it for private pleasure?

Use of Avtur for private pleasure flying without making a declaration, or failing to pay the duty due, will render you liable to a civil penalty. If there’s any likelihood of the fuel being used for private pleasure use then you must make a declaration at the time of purchase. You should keep a note of the change in circumstances should HMRC wish to verify.

13.9 What if I use the fuel for flying outside of the UK and would be eligible to claim aircraft stores relief?

You are entitled to claim drawback of Excise Duty on fuel used if you land abroad.

As a simplification measure, you may offset the duty you’re liable to pay against the duty you intend to reclaim.

To do this you must submit form HO105 or the required information on plain paper in accordance with 13.4 and declaring the duty due. At the same time you must attach and submit a completed form HO60 Fuel Duty: claim for drawback of duty paid on oils used as fuel on foreign-going aircraft or HO65A (aircraft stores relief claim form). An HO60 and HO65A can be obtained from the HMRC Excise Helpline. On the HO105 or plain paper you must declare the net amount of duty due and either tick the appropriate box or indicate that an HO60 or HO65A is attached.

Note: the HO60 and HO65A are to be sent to the address below and not the Mineral Oil Relief Centre as noted on the form.

The forms should be sent to:

HMRC Cumbernauld
Cumbernauld Accounting Team
St Mungo’s Road
Cumbernauld
G67 1YZ

If all of the fuel purchased has been used for flying abroad and you would be entitled to reclaim all of the excise duty it if it were paid, even though no duty is being paid you must still send both forms to HMRC.

If only some of the fuel purchased was used for flying abroad you will have to estimate the amount of fuel used and pay Excise Duty on the amount of fuel used for private pleasure flying within the UK.

13.10 How will HMRC know if the duty has been paid?

HMRC will be able to establish sales of Avtur for private pleasure purposes in the course of routine assurance visits to suppliers and will be able to check whether or not subsequent duty payments have been made by declarants.

They may contact you during the course of these enquiries.

14. Penalties

Situations where a civil penalty under section 9 of the Finance Act 1994 may be imposed include failure by users to:

• make a declaration that Avtur is intended to be used for private pleasure flying
• make complete and accurate declarations
• pay the duty by the due date

Penalties of £250 or 5% of the duty due (whichever is greater) and where appropriate daily penalties of £20 after the due date that payment of duty remains outstanding may be imposed for each contravention.

15. Assessments

Where a person fails to pay the duty on fuel used for private pleasure flying, whether or not that person has made a declaration, the Commissioners of Revenue and Customs have the powers to assess the amount of duty due. A civil penalty may also be imposed.

16. Definition

‘Private pleasure flying’ is defined in the EC Council Directive 2003/96, known as the Energy Products Directive, as:

• private pleasure flying shall mean the use of an aircraft by its owner or the natural or legal person who enjoys its use either through hire or through any other means, for other than commercial purposes and in particular other than for the carriage of passengers or goods or for the supply of services for consideration or for the purposes of public authorities
• this definition is also included in the Hydrocarbon Oils Duties Act 1979

Following the rulings of the Court of Justice of the European Union the nil rate of duty no longer applies to Avtur used in an entity’s own aircraft that is used for the transportation of staff for business purposes without consideration.

The following are considered to be private pleasure flying and are no longer eligible for fuel duty relief (this is not a definitive list):

• transportation of staff in corporate jets or helicopters: if you transport your staff on your corporate jet or helicopter to attend a business meeting or trade fair, the fuel duty exemption will no longer be applicable as this is now considered to be private pleasure flying - the supply of air services for consideration must be the inherent reason for the aircraft’s movements in order to be eligible for this relief - a company using its own aircraft to transport its own staff is not providing air services for consideration
• transportation of business clients: if you have a corporate jet or helicopter and you use this to transport your clients and customers for no consideration, you can no longer claim exemption on the fuel duty relief as this is now considered as private use
• flying for recreational purposes, whether alone or carrying passengers unless they’re fee paying
• flying as a means of personal transportation other than for business purposes

The following are considered not to be private pleasure flying and are eligible for fuel duty relief (this is not a definitive list):

• the use of an aircraft by a company for the carriage of passengers or goods, if there is a consideration for transportation services provided
• flying in support of emergency services such as police, air ambulance, Search and Rescue and medical repatriation and transport of medical and humanitarian supplies is considered not to be private pleasure flying
• provision of air transportation services for a consideration, for example air taxis
• training: if provided through an approved training school or by a qualified instructor and the trainee pilot is under the supervision of an instructor whether or not that instructor accompanies the student
• mail services and freight services provided for a consideration
• agricultural, aerial survey, aerial photography, support for coast guard duties are considered not to be private pleasure flying
• flying for engineering development and testing - the relief here comes under Article 15(1)(j) of Directive 2003/96
• international flying: this use remains exempt

17. Avgas

Avgas is a specialised fuel which undergoes a more complex and expensive distillation process than for other fuels to meet the special demands of aviation. It also has a number of unique characteristics. A new fiscal definition for avgas with its own free standing duty rate has been introduced into HODA 1979. The definition is as follows:

‘aviation gasoline’ means light oil which -

(a) is specially produced as fuel for aircraft,

(b) at 37.8 C, has a Reid Vapour Pressure of not less than 38kPa and not more than 49kPa, and

(c) is delivered for use solely as fuel for aircraft.

All avgas is subject to the same duty rate irrespective of its use, commercial, business or private pleasure flying. The duty rate may be obtained from the HMRC Excise Helpline or from the GOV.UK website.

18. Glossary of terms

Term	Description
Aviation gasoline (avgas)	Light oil which is specially produced as fuel for aircraft, at 37.8C has a reid vapour pressure of not less than 38kPa and not more than 49kPa, and is delivered for use solely as fuel for aircraft.
Aviation turbine fuel (Avtur)	Unmarked kerosene for use as fuel for aircraft engines and delivered under a marking waiver.
Bioblend	A mix of diesel and biodiesel.
Helpline	HMRC’s advice service to trade and public.
Kerosene	Heavy oil of which more than 50% by volume distils at a temperature not exceeding 240 C. Kerosene is also known as paraffin or burning oil.
Marked gas oil	Gas oil that contains fiscal markers signifying that it is rebated and cannot be used as a road fuel. It is also known as ‘red’ or ‘red diesel’ because of the red dye used to mark it, and for the purposes of this notice marked gas oil also refers to marked bioblend.
Rebate	The difference between the full rate of duty and the reduced rate allowed on some types of oil when put to certain uses.
Registered Dealer in Controlled Oils	Anyone approved by HMRC to sell or deal in controlled oils. Controlled oils are marked rebated gas oil (red diesel) and marked rebated kerosene (paraffin, burning oil etc).

Your rights and obligations

Your Charter explains what you can expect from us and what we expect from you. For more information go to Your Charter.

Do you have any comments or suggestions?

If you have any comments or suggestions to make about this notice, please write to:

HMRC
Transport Taxes Team
100 Parliament Street
London
SW1A 2BQ