Fuel duty: aqua-methanol
Published 16 March 2016
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Who is likely to be affected
Businesses producing and importing, and consumers of, hydrocarbon oils and alternative fuel products.
General description of the measure
This measure provides a reduced rate of excise duty for aqua methanol (a new fuel that is 95% methanol, 5% water) that is set aside for use, or used, as fuel in any engine motor or other machinery.
Policy objective
The reduced duty rate is intended to incentivise the uptake of aqua-methanol as a greener cleaner fuel relative to petrol and diesel. The reduced duty rate will take effect on 1 October 2016.
Background to the measure
At Autumn Statement 2013, the government announced that the duty differential between the lower rate for alternative road fuel gases and the main rate for petrol/diesel will be maintained until 2024.
The government announced at Budget 2014, that it will apply a reduced rate of fuel duty to aqua methanol. The rate is set at 7.90 pence per litre.
Detailed proposal
Operative date
The change will have effect on and after 1 October 2016.
Current law
Excise duty rates are in section 6 of the Hydrocarbon Oil Duties Act 1979, which contains the rates for hydrocarbon oils; sections 6AA, 6AB, 6AD and 6AE contains the rates for biofuels; section 8 contains the rates for road fuel gases; section 11 contains rebated rates for heavy oils; section 14 contains the rebated rate for light oil used as furnace fuel; and section 14A contains the rebated rate for certain biodiesel.
Proposed revisions
Legislation in Finance Bill 2016 will introduce a new rate of fuel duty for aqua methanol composed of 95% pure methanol and 5% water.
Summary of impacts
Exchequer impact (£m)
| 2016 to 2017 | 2017 to 2018 | 2018 to 2019 | 2019 to 2020 | 2020 to 2021 |
|---|---|---|---|---|
The Exchequer impact of ‘ Fuel Duty: support for cleaner fuels’ is set out in Table 2.1 of Autumn Statement 2013, and has been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Autumn Statement 2013.
Economic impact
This measure is not expected to have any significant economic impacts.
Impact on individuals, households and families
This measure is not expected to have an impact on family formation, stability or breakdown or on individuals and households.
Equalities impacts
This measure is not expected to have an impact on any equalities group.
Impact on business including civil society organisations
The measure is expected to have a negligible impact on businesses’ administrative burdens but the costs of purchasing aqua-methanol as a fuel for business and civil society organisations will decrease. The small number of businesses affected by the duty reduction will incur negligible one off costs to update their systems. There are not expected to be any additional on-going costs.
Operational impact (£m) (HMRC or other)
This measure is expected to increase the availability of aqua-methanol and so could have an impact on compliance costs.
Other impacts
Carbon assessment: the overall support for cleaner fuels measure is expected to deliver carbon savings.
Monitoring and evaluation
This measure will be kept under review through communication with affected taxpayer groups.
Further advice
If you have any questions about this change, please contact Dale Cambridge-Sharpe on Telephone: 03000 558483 or email: dale.cambridge-sharpe@hmrc.gsi.gov.uk