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HMRC internal manual

Oils Technical Manual

Introduction and overview of oils activity: excise duty on oils (Duty Liability): Biofuels

The government has in the past used a duty incentive to encourage the use of more environmentally friendly fuels such as biodiesel. Until 1 April 2010 there was still a 20 pence per litre differential between biodiesel and hydrocarbon oil, although this 20p difference was retained for a further 2 years until 2012 for recycled cooking oil.

Now, both biodiesel and bioethanol take the full road use rate, the same as hydrocarbon forms of fuel.

Section 2AA of the Hydrocarbon Oil Duties Act 1979 describes biodiesel as a diesel quality liquid fuel that is produced from biomass or waste cooking oil, and which is not less than 96.5% by weight and a sulphur content not exceeding 0.005%.

Biodiesel is described in the law as a diesel quality* liquid fuel that is produced from biomass or waste cooking oil:

  • the ester content of which is not less than 96.5 per cent by weight, and
  • the sulphur content of which does not exceed 0.005 per cent by weight, or is nil

*diesel quality means that the fuel is a substitute for diesel rather than petrol.

Formerly, there was a lower rate (by 20ppl) for biodiesel meeting this definition. Biofuel not meeting this definition would take the full rate because it would instead be treated as a fuel substitute. While technically this difference still exists, since April 2010 there has been no difference in duty rate between biodiesel and biofuel (fuel substitiute that does not meet the biodiesel spec).

‘Bioblend’ means any mixture that is produced by mixing:

  • biodiesel, and
  • heavy oil that has not been charged with the excise duty on hydrocarbon oil.

The duty rate for bioblend (including bioethanol blend) is split between the component parts of hydrocarbons and biofuel within the mix. However, since 2010, these rates have been the same when used as road fuel.

‘Bioethanol’ means a liquid fuel:

  • consisting of ethanol produced from biomass, and
  • capable of being used for the same purposes as light oil.

‘Bioethanol blend’ means any mixture that is produced by mixing:

  • bioethanol, and
  • hydrocarbon oil not charged with excise duty.

Biodiesel and bioethanol may be used on their own, as alternatives to hydrocarbon (mineral) oils, or they may be mixed with hydrocarbon oils in order to produce bioblends.

For further information on biofuels please see Public Notice 179E. Guidance on biofuels assurance is available in HCOBIG ‘Biofuels Assurance’. A GLU on ‘Biofuels/Fuel Additives/Fuel Substitutes’ Reference 003208 is available in Online Learning.

** Details of the current rates of excise duty can be found on our website.