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HMRC internal manual

Oils Technical Manual

Introduction and overview of oils activity: excise duty on oils (Duty Liability): reliefs from oil duty

In addition to being supplied at a reduced duty rate due to the use of duty incentives and rebates, oils may also be supplied either duty-suspended or fully relieved from duty when these are removed from a tax warehouse, either for export or to be put to a number of other qualifying uses.

(Details of reliefs from excise duty on oils may be found in the Tariff, Volume 1, Section 13, and in various Notices. There are TPQs available (see Tax Academy/Excise) on ‘Tied Oils’ and ‘Other Reliefs’).Oils may be supplied conditionally relieved of excise duty when they are put to a number of qualifying industrial uses under the Tied Oil scheme other than for use as a motor fuel (including as an extender or additive) or as a heating fuel. As most Tied Oils are supplied fully relieved of excise duty, they could potentially be misused. (A GLU on ‘Tied Oils’ Reference 002377 is now available on Online Learning).

Duty may be reclaimed on oil used on board any type of vessel, even oil rigs, while engaged on a Marine Voyage. Private journeys for pleasure cannot reclaim duty. Light oils must be supplied for marine voyages duty-paid, and repayment of the duty claimed. Heavy oil may either be shipped duty free, or supplied duty paid and repayment of the duty claimed.

The duty on heavy oil used in Horticulture may be reclaimed.

Oil may also be consumed in premises approved by HMRC as a refinery (as a motor and heating fuel producer’s premises) for the process of chemical conversion into substances other than mineral oils, free of duty.

Rebated oil can be used as a fuel in power plants producing energy for the treatment or for the production of oil at refineries or producers premises free of excise duty, if the power plant is eligible for full relief or on repayment of excise duty if it is only eligible for partial relief. See Notice 175, which also gives details of carbon price support (CPS), introduced on 1 April 2013, and how this affects the amount of duty that can be reclaimed.

See Notice 179, Appendix J, for information on Relief from Excise Duty: Oil Used as a Fuel to produce energy for use in the treatment or production of oil at approved producers’ premises.

Oils can be supplied duty free to the United States and NATO Forces in the UK under Visiting Forces relief. Oil may also be supplied duty free to Lighthouse Authorities and for use by the RNLI.

Marked oils such as marked gas oil (MGO) and marked kerosene (MKO) may be supplied at a reduced or ‘rebated’ rate of duty for qualifying off road use under the Registered Dealers in Controlled Oil (RDCO) scheme.

For further information on the RDCO scheme see Notice 192.

A Guided Learning Unit on Registered Dealers in Controlled Oils Reference 003202 is available in Online Learning.

(Further information on those oils controlled on delivery under the RDCO and Tied Oils schemes, or delivered under a mineral oils relief may be found in section on ‘Deliveries from Warehouse’ of this guidance HCOTEG90000).

Rural Fuel Duty relief took effect from January 2012, and allows fuel retailers in certain specified postcodes in Scotland, the Isles of Scilly, and Yorkshire, to reclaim 5 pence per litre duty relief, but they are expected to reduce their selling price by the same amount to their customers.