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BMF Praises 'Cost Effective Solution' Presented In UK Red Diesel Consultation

by Jason Gorringe, Tax-News.com, London

07 August 2007


The British Marine Federation (BMF) has welcomed the recent publication by the UK government of a consultation on red diesel which would potentially allow the fuel to continue to be sold, although at a higher rate of duty - saving the significant cost of changing fuel infrastructure and tanks on board boats.

Until 31 December 2006, the UK held a derogation from the European Energy Products Directive which allowed it to charge a reduced rate of duty on fuel used in private pleasure craft. The derogation had in fact been time limited since the mineral oils directive, the predecessor to the EPD, was agreed and signed in 1992.

In 2001, the UK negotiated an extension to the derogation to December 2006. A request to extend the derogation further was submitted in October 2006; however, this was rejected by the European Commission and the derogation consequently expired on 31 December 2006.

The Commission argued that since the fuel had been taxable in principle since 1993, member states had had enough time to adapt to the requirements of community law.

It did not accept the UK’s argument that there would be additional administrative burdens or compliance costs resulting from the expiry of the derogations, reasoning that if such arguments were to be accepted then the derogations would need to be maintained indefinitely, contradicting the principle that derogations are time limited and intended to assist with overcoming any initial difficulties encountered with the introduction of new regimes.

Then Chancellor of the Exchequer, Gordon Brown announced in his 2007 Budget that from November 1 2008, fuel used for these purposes would no longer benefit from reduced rates. The Budget also announced that the Government would consult on the proposed changes and new procedures.

HM Revenue and Customs last week opened their consultation, 'Energy Products Directive - expiry of the derogation for private pleasure boats', on the new regime set to replace the current 'reduced rate of duty' marine diesel used by pleasure craft.

According to the BMF:

"Following extensive representations by the British Marine Federation and the RYA, along with the Inland Waterways Association and the Federation of Petroleum Supplies, the Government has indicated that its preferred option is to continue to allow leisure boat users to use red diesel while paying the full rate of duty. This would mean that suppliers could continue to use the current infrastructure and users would not have to change or add tanks on their boats. The added costs of providing new equipment threatened the profitability of fuel providers and would dramatically reduce the availability of fuel to leisure boaters."

Neil Northmore, RYA Government Affairs Adviser observed that:

"The options laid out in the consultation paper certainly do seem to focus on minimising the impact. We are pleased that both recreational boater's concerns and those of the marine industry have been heard and incorporated. It is evident that HMRC have worked hard to develop options that could work for all concerned."

Howard Pridding, BMF Executive Director added:

"The BMF and RYA have been pressing officials to minimise the impact of the fuel duty changes and we are pleased to see that this has been taken on board. We will now be consulting with our members to gauge their views on the best way forward to ensure that the details of any scheme are right for boaters and the marine industry. We would encourage all interested parties to read the consultation and then feed their views into us and also the HMRC."

The consultation closes on 31 October 2007.


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