Relief from Fuel Duty for recovered unleaded petrol vapour
Published 21 December 2016
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This publication is available at https://www.gov.uk/government/publications/relief-from-fuel-duty-for-recovered-unleaded-petrol-vapour/relief-from-fuel-duty-for-recovered-unleaded-petrol-vapour
Who is likely to be affected
Businesses releasing unleaded petrol into the UK market from refineries and import warehouses.
General description of the measure
The measure provides a relief from Fuel Duty to prevent double taxation on unleaded petrol vapour captured and returned to stock during loading at refineries and import terminals.
Policy objective
The measure will continue to facilitate the capture and recycling of unleaded petrol vapour during the loading process and ensure the correct amount of Fuel Duty is collected. The measure puts the relief provided for by an existing Extra Statutory Concession (ESC) on a legal footing. Without this relief product captured through the vapour recovery process would be taxed for a second time when later released from the warehouse, meaning that HM Revenue and Customs (HMRC) would collect more than the correct amount of Fuel Duty due.
Background to the measure
Unleaded petrol evaporates inside a storage tank or the tank of a vehicle and the vapour fills the space above the liquid fuel. When unleaded petrol is delivered into a vehicle, evaporated fuel is forced out by the fuel being loaded. The law requires operators to adopt measures to capture the displaced vapour to prevent harmful emissions into the atmosphere.
Fuel Duty is charged when unleaded petrol is released for consumption from a refinery or import terminal. Therefore, by the time the unleaded petrol vapour is released and captured it has already been subject to Fuel Duty.
To enable producers to recycle recovered fuel and avoid double taxation of it, HMRC allows them to return the captured product to an excise warehouse and claim a credit of Fuel Duty already paid on the recovered product.
There is no UK legislation to support this Fuel Duty relief, which is provided for by an ESC. In June 2015, HMRC launched a public consultation: Vapour recovery scheme: options for replacing the ESC. The consultation ended on 9 September 2015.
Having considered the responses, the government decided to legislate for a simple relief to place the Fuel Duty relief provided for by the ESC on a legal footing. A summary of the consultation response and the government’s decision was published on 21 December 2015.
Detailed proposal
Operative date
These changes have effect on and after 1 April 2017.
Current law
There is no UK legislation to support the vapour recovery scheme, which is provided for by an ESC.
Proposed Revisions
The legislation will provide for relief from Fuel Duty on unleaded petrol vapour captured during the loading process at refineries and import terminals (duty point terminals) and returned to an excise warehouse for recycling. The relief will prevent double taxation of the recovered unleaded petrol when it is subsequently released for consumption, by allowing duty to be offset against the total liability for Fuel Duty on product metered as it passes the duty point.
This legislation replaces Extra Statutory Concession 6.3. Excise – hydrocarbon oil duty: Relief of duty on recovered motor spirit vapour.
Summary of impacts
Exchequer impact (£m)
| 2017 to 2018 | 2018 to 2019 | 2019 to 2020 | 2020 to 2021 | 2021 to 2022 |
|---|---|---|---|---|
| nil | nil | nil | nil | nil |
This measure is not expected to have any Exchequer impact.
Economic impact
This measure is not expected to have any significant economic impact.
Impact on individuals and households
This measure is not expected to have any impact on individuals and households.
Equalities impacts
This measure is not expected to have any impact on individuals with protected characteristics.
Customer cost impact
Minimal customer cost impact expected. (Customers are all businesses – see below.)
Impact on business including civil society organisations
This measure is expected to have a negligible impact on businesses and civil society organisations.
The new scheme builds on existing industry practice, minimising the impact on businesses.
Small and micro business assessment: a full assessment of the impact on small and micro businesses has been carried out following consultation. The measure principally affects large businesses releasing petrol for consumption in the UK market from refineries and import warehouses. The measure is not expected to have any significant impact on small and micro businesses.
Operational impact (£m) (HMRC or other)
This measure is not expected to have any significant impact on HMRC. HMRC will administer the ‘vapour recovery scheme’ and ensure compliance. Only a small number of claimants are expected, and the new system will involve no change to HMRC’s role of ensuring that the correct amount of Fuel Duty is paid when due.
Other impacts
Other impacts have been considered and none have been identified.
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 Tony Baxter on Telephone: 03000 587921 or email: tony.baxter@hmrc.gsi.gov.uk.
Declaration
Jane Ellison MP, Financial Secretary to the Treasury has read this Tax Information and Impact Note and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impacts of the measure.