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HMRC internal manual

Oils Technical Manual

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HM Revenue & Customs
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Receipts into Warehouse: Allowance of duty credit on returned oil

Oil returned to duty-suspended storage

If a duty credit is allowable on unused duty-paid oil returned to duty-suspended storage under the provisions of HCOTEG71750, HCOTEG72250 and HCOTEG72500, credit of duty is to be allowed on the quantity of oil returned at the rate(s) applicable to the oil at the time it became contaminated or mixed, NOT at the rate applicable when it was originally delivered to home use.

This recognises that it would often be difficult, if not impossible to demonstrate exactly what rate(s) of duty particular parcels of oil had borne when they had initially been delivered to home use. So the rate(s) current at the time of contamination are specified in HODA section 20(3).

If the oil comprises a mixture of oils, which on first delivery from duty-suspended storage were duty paid under different categories, e.g. rebated and un-rebated, credit is to be allowed at each rate on the quantities of each category in the mixture.

For example: if 2,000 litres of contaminated oil are returned because 1,200 litres of gasoline were delivered in error into a tank containing 800 litres of marked Gas Oil, credit is to be allowed on 1,200 litres at the current gasoline rate of duty and on 800 litres at the current gas oil rebated rate.

However, if a sample has been tested by LGC, the proportions of oil found by them are to be used in calculating the credit of duty.

Duty credit is to be allowed in this way irrespective of the proposed method of treatment of the returned oil and irrespective of the rate of duty actually paid on the oil at the time of its delivery to home use, provided that a credit at the full rate of duty is not allowed on oil which has borne only the rebated rate, nor any credit allowed on oil which has not previously borne duty, e.g. tied oil, fully rebated oil or “free” oil.

Credit of duty on oil returned to warehouse

The credit of duty will generally be due to the warehousekeeper to whose warehouse the product is returned but this will not always be the case where inter-company drawing arrangements exist. In the latter case it will be usual for the company to whom the credit is actually due to be allowed to take it. When officially authorised to do so, the warehousekeeper is to include details of the credit as a separate item in the schedule of duty-paid deliveries sent to the Central Accounting Point (CAP) of the duty deferment holder to whom the credit is due. If there is no schedule, because there have been no dutiable withdrawals during that deferment period, then the warehouse-keeper is to send a notification showing full details of the authorised credit to the CAP of the trader to whom the credit is due. A copy of such notification is to be sent to the oils assurance team by the warehousekeeper.

Duty-paid oil returned to remote marking premises

Where un-rebated products have become contaminated or accidentally mixed and are returned to stocks of un-rebated oil, no duty credit is to be granted, or additional duty charged; similarly where rebated products are returned to rebated stocks, no credit or additional charge is to be made.

Rebate of duty is not to be allowed even when un-rebated oil, which has become contaminated or accidentally mixed, is returned to RMPs and is satisfactorily marked. Credit of duty can only be allowed when goods are return to a tax warehouse. Where rebated oil is flooded into un-rebated stocks, the appropriate additional duty is to be charged on that rebated portion of the mixture (see Notice 179 paragraph 5.8).