HCOS5200 - Post detection audit and assessment: Appendix A: assessments: legal provisions

Situation Power to Assess Law
End user misusing rebated oil. Yes. Assess for the rebate allowed. Power to assess: HODA 1979 Section 13(1A).Person liable for the duty: Any person who used the oil or was liable for the oil being taken into the vehicle (the person having charge of the vehicle or its owner) HODA 1979 S13(1A).Penalty: HODA 1979 S13(1) for (a) using and / or (b) taking in.
End user misusing laundered UK rebated oil. Yes. The laundering is irrelevant - it is still rebated fuel. Assess for the rebate. Note: The scope of HODA 1979 S13 (1A) excludes ‘Smuggled’ laundered oil. ( *See below ) Power to assess: HODA 1979 Section 13(1A).Person liable for the duty: Any person who used the oil or was liable for the oil being taken into the vehicle (the person having charge of the vehicle or its owner) HODA 1979 S13(1A).Penalty: HODA 1979 S13(1) for (a) using and / or (b) taking in.
Excepted vehicle using rebated fuel outside of the limitations of HODA 1979 Schedule 1 Yes. Vehicle loses excepted status. Treat as misuse in a road vehicle. Power to assess: HODA 1979 Section 13(1A). Person liable for the duty: Any person who used the oil or was liable for the oil being taken into the vehicle (the person having charge of the vehicle or its owner) HODA 1979 S13(1A). Penalty: HODA 1979 S13(1) for (a) using and / or (b) taking in.
Smuggling of oil Yes. Illegal importation. Assess for duty. Person liable: The importer - Regulation 13(2) of the Excise Goods (Holding, Movement and Duty Point) Regulations 2010. Definition of an ‘importer’ CEMA s1 Duty charge: HODA 1979 Section 6.Duty point: Regulation 13(1) of the Excise Goods (Holding, Movement and Duty Point) Regulations 2010.Power to assess: Finance Act 1994 Section 12 (1A).
Decanting of oil imported under the Travellers Reliefs (Fuel and Lubricants) Order 1995. Yes. Contravention of condition of relief. Assess for duty. Duty charge: HODA 1979 Section 6. Duty point: Regulation 18(1) of the Excise Goods (Holding, Movement and Duty Point) Regulations 2010. Power to assess: Finance Act 1994 Section 12.Person liable: The importer - Regulation 18(2) of the Excise Goods (Holding, Movement and Duty Point) Regulations 2010.
Supply of rebated oil as road fuel. No. HODA S12 and 13 apply to end user only. Penalty (for knowingly supplying for misuse) under HODA 1979 S13(2).
Supply of laundered rebated UK oil as a road fuel. No. HODA S12 and 13 apply to end user only. Penalty (for knowingly supplying for misuse) under HODA 1979 S13(2).
Deliberate supply of a mixture of fully rebated and non-rebated heavy oil for use as fuel for a road vehicle. Yes. New duty point created. Assess for duty on the oil supplied. The assessment should be for the heavy oil duty rate minus the amount of duty that has been paid in respect of the un-rebated oil. Remaining stocks of mixed oil should have been seized. Do not assess for the seized oil. Duty charge and duty point: HODA 1979 Sections 20AAA(1). Power to assess: HODA 1979 Section 20AAB(4) Person liable: The person supplying the mixture - HODA 1979 Section 20AAB(4).Penalty: HODA 1979 S20AAB(8). Rate of Duty: HODA 1979 Section 20AAA (4) and (5)
Accidental supply of a mixture of rebated and non-rebated oil. No. Intention to mix must be established to assess for duty. The trader must arrange for the contaminated oil to be removed.  
Deliberate supply of a mixture of partly rebated and non-rebated heavy oil for use in a road vehicle Yes. New duty point created. Assess for duty on the oil supplied. The assessment should be for the heavy oil duty rate minus the amount of duty that has been paid in respect of the partly rebated oil. Duty charge and duty point: HODA 1979 Sections 20AAA(2) . Power to assess: HODA 1979 Section 20AAB(4) Person liable: The person supplying the mixture - HODA 1979 Section 20AAB(4).Penalty: HODA 1979 S20AAB(8). Rate of Duty: HODA 1979 Section 20AAA (4) and (5)
Deliberate supply of a mixture of fully rebated and partially rebated oil for use in an excepted vehicle. There is provision to assess at the heavy oil rate less duty paid in respect of the partially rebated oil. However, it is our policy to remit the duty to take into account that the benefit to the trader is the amount of the partially rebated rate of duty on the fully rebated oil in the mixture. This may mean that assessment action is not cost effective. Duty charge and duty point: HODA 1979 Sections 20AAA(2). Power to assess: HODA 1979 Section 20AAB(4) Person liable: The person supplying the mixture - HODA 1979 Section 20AAB(4). Penalty: HODA 1979 S20AAB(8).
Removal of markers and dyes (laundering). It is not departmental policy to assess launderers. The lost revenue should be recovered from the actual launderer under the proceeds of crime legislation following prosecution under CEMA section 170(2)(a).  

Please note that there is no provision for the adding of VAT to any arrears of excise duty calculated following a detection.

Misuse of rebated oil does not create a tax point for VAT. However, during a post-detection audit for misuse of oil you may come across VAT non-compliance such as suppression of sales or bogus fuel invoices with the potential for disallowance of input tax.

You should refer these cases to RIS to determine how to deal with the non-compliance.

For biofuels guidance, see HCOBIG Biofuels and Fuel Substitutes Assurance - HCOBIG.