Introduction and overview of oils activity: excise duty on oils (Duty Liability): Rebated oils (for off-road and other qualifying uses)
Unmarked Heavy oil, including DERV and road fuel extenders, unmarked kerosene or unmarked gas oil attracts the full (un-rebated) rate of excise duty. For the latest and for historic rates for these and all types of oil or energy product, refer to GOV.UK. Oil not to be used as a road fuel, which is put to off-road use or to other qualifying uses, attracts a rebate of duty, which when applied to the full rate for the oil creates effectively a new lower rate of excise duty.
The Hydrocarbon Oil Duties Act 1979 (HODA) - Schedule 1, gives details of those vehicles which are ‘Excepted Vehicles’ and which are entitled to use marked rebated oils for off-road use, provided that these are put to eligible use.
Schedule 1 of HODA was amended on 1 November 2013 to allow the use of rebated fuel for gritting by vehicles other than purpose-built gritters.
(For further information on ‘Excepted Vehicles’ and various concessions, please see our pages on GOV.UK).
Light Oil Furnace Fuel (LOFF) which would attract a full unrebated excise duty rate if used as a road fuel, attracts a rebate when it is used in boilers and furnaces as a heating fuel.
Because many of the oils which are supplied ‘rebated’ can be used either as a road fuel or as an road fuel extender, most types of rebated fuel are marked and/or dyed as evidence that this has been supplied at a reduced rate of duty, either for off-road or for other eligible use.
Rebated oils include Marked Kerosene (MKO) that is normally used as domestic heating oil but may be used as a motor fuel ‘off road’ or in an excepted vehicle, and Marked Gas Oil (MGO) also known as ‘Red Diesel’.
Marked Gas Oil attracts a partial rebate, and Marked Kerosene attracts a full rebate, making the effective duty rate nil.
Aviation Turbine Fuel (AVTUR) is a high specification kerosene, which is also supplied rebated but unmarked for aircraft use. It also attracts a full rebate, making the effective duty rate - Nil.
Heavy Fuel Oil, which would attract the full (un-rebated) heavy oil duty rate if used as a road fuel, although it would be unsuitable for most engines, attracts a rebate when it is used as a heating fuel.
Marked rebated mineral oils remain controlled beyond the duty point until they have been supplied and put to eligible use, under the Registered Dealers in Controlled Oil* (RDCO) scheme. This is because there is an incentive to misuse them as a road fuel (especially MGO or ‘red’ diesel), or as a road fuel additive or extender (kerosene), due to the difference between the unrebated and rebated duty rates involved. To counter this risk, HMRC implemented the Oils Strategy, which is aimed at reducing and controlling the volumes of marked rebated mineral oils diverted to illegal road fuel use.
- An RDCO TPQ learning product is now available on HMRC Learning.
** Details of the current rates of excise duty can be found on HMRC’s pages at GOV.UK