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HMRC internal manual

Hydrocarbon Oils Strategy

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HM Revenue & Customs
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Post detection audit and assessment: other post detection cases

Relevant law

Please refer to HCOS5200 which sets out the most common situations requiring consideration of assessment action and the relevant legislation on duty charging provisions, duty points, powers to assess and the persons liable to pay the duty.

Note: it is important to remember that end users of oil, such as hauliers, are not revenue traders for the purposes of the Customs and Excise Management Act 1979 (CEMA), unless they are registered for other business activity eg they are a Registered Dealer in Controlled Oils (RDCO). Therefore the CEMA sections on production of records do not apply when conducting post-detection audits for misuse of oil.

Laundered UK fuel

This term is used to describe UK rebated fuel where an attempt has been made to remove the statutory chemical markers and dyes.(This content has been withheld because of exemptions in the Freedom of Information Act 2000) HCOS4850(This content has been withheld because of exemptions in the Freedom of Information Act 2000)  

Laundering and illegal biofuel plants

Health and Safety

Work in connection with oil is likely to present a variety of safety hazards. Those hazards may be continuous or intermittent, general or localised and their nature and severity may vary according to the product(s) being handled and the precise work being carried out. It is essential before attending any oil premises, that all officers are familiar with the possible hazards to safety on those premises. All officers also need to be aware of the provisions of the relevant HS books of guidance, particularly HS-10 ‘Hazardous substances’ before visiting any oils premises or physically examining oils.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

Laundering and illegal biofuel plants are particularly hazardous areas.

Only appropriately trained personnel should enter these and they must have assistance from the recognised experts employed by the Department.

Post Detection Audit and Assessment

When laundering plants, where markers and dyes are removed from rebated oil, are discovered, those responsible are prosecuted. Also, illegal plants processing vegetable oil to make road fuel face the same action. It is Departmental policy to recover the revenue lost through application to the courts for confiscation of assets rather than through the issuing of assessments.

Local Compliance staff may be asked to carry out an audit to identify the revenue loss and produce schedules for evidence in the criminal prosecution.

Use of laundered fuel or illegally processed biofuel

Those who take in or use laundered fuel or illegally-produced biofuel for use as a road fuel are liable to duty under Hydrocarbon Oils Duties Act 1979 (HODA) s13(1A). However, in these cases you should consider if assessment action is reasonable in the circumstances. If the person bought the oil innocently from a fuel station, believing it to be road fuel and paid full price for it then it would be unfair to raise an assessment. However, if the purchaser of the oil bought it cheaply in obviously non-legitimate circumstances, then the amount of laundered oil used should be established and an assessment made.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

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(This content has been withheld because of exemptions in the Freedom of Information Act 2000) (This content has been withheld because of exemptions in the Freedom of Information Act 2000) HCOS4825(This content has been withheld because of exemptions in the Freedom of Information Act 2000) HCOS5200(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

Supply of rebated oil as road fuel

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

Mixing of fully rebated and non-rebated oil

Where fully rebated oil is mixed with non-rebated heavy oil and supplied for use in a road vehicle we have powers of assessment under section 20AAB(4) of Hydrocarbon Oils Duties Act 1979 (HODA). The rate of duty is that determined under HODA Section 20AAA(4) and (5).

The person liable to pay the duty in these cases is the person supplying or producing the mixture not the misuser. (This content has been withheld because of exemptions in the Freedom of Information Act 2000) HCOS5550(This content has been withheld because of exemptions in the Freedom of Information Act 2000)  

Mixing of fully rebated and partially rebated oil

Where kerosene is mixed with red diesel and sold for use in an excepted vehicle there is a liability to duty under section 20AAA of Hydrocarbon Oils Duties Act 1979 (HODA). The rate of duty is that determined under HODA Section 20AAA(4) and (5).

The person liable to pay the duty in these cases is the person supplying or producing the mixture not the misuser. (This content has been withheld because of exemptions in the Freedom of Information Act 2000) HCOS5550(This content has been withheld because of exemptions in the Freedom of Information Act 2000)  

Smuggled fuel

Smuggled oil (including either foreign rebated or laundered fuel) should be treated as an illegal importation, upon which the excise duty due has not been paid. The duty charge arises under Hydrocarbon Oils Duties Act 1979 (HODA) Section 6 and the duty point is set by Regulation 13(1) of the Excise Goods (Holding, Movement and Duty Point) Regulations 2010.

We have powers to assess for the duty given by the Finance Act 1994 Section 12 (1A). The person liable is the importer, under Regulation 13(2) of the Excise Goods (Holding, Movement, and Duty Point) Regulations 2010.