HCOTEG12810 - Introduction and overview of oils activity: excise duty on oils (Duty Liability): Biofuels
The government has used duty incentives to encourage the use of more environmentally friendly fuels such as biodiesel. Biodiesel and bioethanol are now charged at the same rate of excise duty as the equivalent hydrocarbon (mineral) fuels when used as road 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 has an ester content of not less than 96.5% by weight and a sulphur content not exceeding 0.005% by weight.
*diesel quality means that the fuel is a substitute for diesel rather than petrol.
Biofuel that does not meet this definition is treated as a fuel substitute. Although the distinction between biodiesel and fuel substitutes remains in legislation, biodiesel and fuel substitutes used as road fuel are currently subject to the same rate of duty.
'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, where used as road fuel, the applicable rates are currently the same.
'Bioethanol' means a liquid fuel consisting of ethanol produced from biomass.
'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’.