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HMRC internal manual

Compliance Handbook

Penalties for VAT and Excise Wrongdoing: In what circumstances is a penalty payable: Supplying a product for use that attracts higher duty

A person will be liable to a penalty if they

  • supply a product of the kind listed in CH91500 to another person, and
  • know that the other person will use it for a purpose that attracts a higher duty.


From 1 November 2008 the duty on fuel for boats used for private purposes is at the heavy oil rate. But the duty on fuel used for other purposes (for example domestic heating) is at the rebated gas oil rate.

If the supplier supplies fuel that has been taxed at the rebated gas oil rate, knowing that the purchaser will use it to fuel a boat used for private purposes, the supplier will be liable to a penalty.

Where a supplier is liable to a penalty there cannot be a reasonable excuse, see CH92000, for his act. The supplier knew that the product would be misused and therefore the supply was a deliberate act, see CH93100 and CH93200.

You will need to gather evidence to show that at the time they sold the product, the supplier knew that it was to be misused. You cannot assume that the supplier knew how the product was going to be used when he sold it. CH93350 discusses the onus of proof and CH93400 the level of proof required.

FA08/SCH41/PARA3 (2)