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HMRC internal manual

Hydrocarbon Oils Strategy

HM Revenue & Customs
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Tied Oils: Tied Oils scheme: background

Mineral oils intended for use in an industrial process can be delivered conditionally relieved of duty to traders approved to receive them under the Hydrocarbon Oil Duties Act (HODA) 1979, Section 9 - this is known as the Tied Oils (or Industrial Reliefs) scheme. Traders can be approved to distribute the oils or to put them to eligible use (any use other than as fuel for any engine, motor or other machinery (including extender or additive to motor fuel) or heating fuel). Users can also be approved to receive duty paid oil for an eligible use then make a claim for repayment of the duty.

All approved traders must keep records of their supply or use of tied oil and those who use or distribute more than 10,000 litres per year must submit returns unless they deal in low risk ‘category E’ oils. Tied oil distributors are required to check the approval numbers of their customers and other details concerning the oil type and the delivery address before making the supply. This is to satisfy them and us that the end user is genuine. Full details of the scheme can be found in Notice 184A Mineral (Hydrocarbon) Oils put to certain uses: Excise Duty Relief.

Assurance is required that traders exercise due control over the oils from receipt to proper disposal. This will involve controls over imports, exports and deliveries. These controls are normally exercised by identifying the various systems involved and applying Systems Based Control (SBC) audit techniques. Some physical controls are also necessary to ensure quality assurance of these processes.

Exceptionally, some oil may be delivered at the rebated rate without marking (ie, under a marking waiver) when it does not qualify for relief under HODA, Section 9. This is because the addition of marker is considered detrimental to its end use. Section 8 of Notice 179 contains more details on marking.

Assurance of these traders is necessary to ensure the unmarked product is put to an eligible use and not diverted for misuse as road fuel.

Notice 184A also gives details of two situations in which returns are not required, if no other types of tied oil are distributed or used. These are category E tied oils (see list in paragraph 18.4), for which approval is required, and the class approval scheme (see Section 15) which allows any tied oil to be distributed and used without the need for individual approval, as long as all oil is kept within closed containers of 210 litres or less. The class approval scheme is currently under review. Changes will be announced in advance of taking effect.