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HMRC internal manual

Hydrocarbon Oils Strategy

From
HM Revenue & Customs
Updated
, see all updates

Tied Oils: Tied Oil systems and risk table

 

System: Approval

Audit Objective: To ensure that the details on the approval are correct and up to date.

Control Objectives Risk Area Risk Ranking Trader Controls Compliance Test Substantive Test
           
Regulatory Trader is operating outside the conditions of approval, eg new categories of oil not notified, changes in premises not notified. Medium Trader should notify any changes in the business, which affect the approval to the Mineral Oil Reliefs Centre (MORC) Ensure details on the approval are up to date and consistent with the trader’s business activities Confirm the legal entity.

Confirm that details of all premises at which tied oils are received, stored and/or used are listed on the approval.

Confirm that all oil received is in categories listed on the approval.

System: Stock control

Audit Objective: To ensure that the trader exercises adequate stock control and accounts for duty on oil put to ineligible use.

Control Objectives Risk Area Risk Ranking Trader Controls Compliance Test Substantive Test
           
Completeness          

Measurement

Disclosure

Occurrence Tied oil is sold on for use, or is used by the trader as motor / heating fuel without prior payment of duty. High
But dependent on oil type ie suitability for misuse. Trader must hold sufficient stocks of duty paid oil to meet their needs. Trader must maintain accurate records of receipts and dispatches of tied oil and stock held, and must submit HO34 returns as required. Duty must be accounted for where tied oil is put to an ineligible use. Check that the trader maintains accurate stock records and accounts for the duty on any oil put to ineligible use. Examine receipt / purchase records and compare to sales / dispatch / production records and stock on hand to identify any discrepancies.

Undertake physical stock challenges.

Examine sales / disposals records to identify any ineligible deliveries. Confirm duty has been accounted for on those oils.

System: Losses

Audit Objective: To ensure that losses of tied oil are accounted for.

Control Objectives Risk Area Risk Ranking Trader Controls Compliance Test Substantive Test
           
Measurement          

Disclosure

Occurrence Losses of tied oil are in excess of acceptable allowances (see Notice 184A for the guidelines). High Trader should have a system in place to identify and account for losses. Ensure that the traders stock control system brings losses to account and that duty is paid on any unexplained losses outside the acceptable parameters. Examine receipt, dispatch and stock records to identify discrepancies.
Examine payments records to ensure that duty has been paid on any unacceptable losses.

System: Waste oil

Audit Objective: To ensure that disposals of waste oil are accounted for.

Control Objectives Risk Area Risk Ranking Trader Controls Compliance Test Substantive Test
           
Measurement          

Disclosure

Occurrence Duty not accounted for on disposals of waste oils High Trader must keep accurate records of disposals of waste tied oils and account for duty where due in accordance with N184A Section 11. Confirm that the trader keeps accurate records of disposals of waste oils and accounts for duty where due. Examine stock, purchase and sales records to identify disposals of waste oil and check that tied oils have been:
  • destroyed in accordance with N184A S11.2 item 5
  • distributed for eligible use in accordance with N184A S11.2 item 1,2 or 3
  • disposed of and duty accounted for
  • disposed of to a Duty Suspended Installation in accordance with N184A S11.2 item 6
  • burned as furnace fuel by the trader, or
  • disposed of to a waste dealer for subsequent use as a furnace fuel in accordance with N184A S11.2 Item 4.

System: UK Deliveries

Audit Objective: To verify deliveries are made only to approved traders.

Control          
Objectives Risk Area Risk Ranking Trader Controls Compliance Test Substantive Test
           
Regulatory Trader supplies tied oil to traders not approved to receive it, and may put it to ineligible use. High/      
medium Trader must have in place, a system for checking customers’ entitlement to receive the requested tied oil at the address requested. Trader must obtain the customer approval number with the order. Initial and regular checks must be made using the HMR&C internet look up service or the NAS. Confirm trader holds record of trader approval numbers.
Confirm trader undertakes sufficient checks to confirm the eligibility of their customers to receive the product they request. Examine sales/customer records for:
  • Evidence that customer approval numbers have been obtained before supplies made.
  • Evidence that checks have been made on the customers’ approvals.

Select a sample of customers to:

  • Check that the approval is valid and correct.
  • Complete excise references for issue to the local risk and assurance staff for the customer to verify that the oil is put to an eligible use.

System: EU Deliveries / Exports

Audit Objective: To ensure Holding and Movements documentation and procedures are in place for all intra EU disposals / Exports.

Control          
Objectives Risk Area Risk Ranking Trader Controls Compliance Test Substantive Test
           
Regulatory Diversion of oil despatched under duty suspension to misuse as road or heating fuel.        

Diversion of oil declared as exported diverted to misuse as road or heating fuel

Exports by class approved trader (not permitted) High / Medium Trader must be approved as an excise and/or tax warehouse for movements of oil to other EU states in accordance with Holding and Movements rules and in accordance with Notice 184A.
Trader must hold evidence of export for deliveries of tied oil outside the EU. Confirm that all despatches of oil to EU states comply with Holding and Movements regulations.
Confirm that trader holds evidence of export for all movements of oil to countries outside the EU. Examine traders sales records to establish that:

All EU deliveries are made through excise warehouse or that the trader has the necessary tied oils approvals in place.

Check e-AD documents returned from the receiving country.

Check that the Intra EU movement guarantee is commensurate with the revenue at risk.

Check documentation for exports to non-EU destinations.

System: EU Receipts / Imports

Audit Objective: To ensure Holding and Movements documentation and procedures are in place for all intra EU receipts / imports.

Control Objectives Risk Area Risk Ranking Trader Controls Compliance Test Substantive Test
           
Regulatory Diversion of oils received under duty suspension to use as road fuel or heating fuel High / medium Oil from other EU states must be received into an excise or tax warehouse under the correct Holding and Movements procedures and documentation in accordance with Notice 184A. Confirm that the trader has the correct approvals in place and that receipts from other EU states comply with the Holding and Movements requirements. Examine Purchase records to:

Check that e-AD documents are held for EU Receipts.

Check that imports are properly accounted for and the correct documentation is held.

Examine trader records to ensure that they have the appropriate approvals in place for both intra-EU movements and imports.