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UK Referred To ECJ Over Lax Red Diesel Controls

by Robert Lee, Tax-News.com, London

15 July 2014


The European Commission has referred the UK to the European Court of Justice after it failed to amend legislation to ensure that private pleasure boats can no longer buy lower taxed fuels intended for fishing vessels.

The move comes after the Commission issued the UK with both a reasoned opinion and formal request last year.

Under European Union (EU) rules, fuel benefiting from a reduced tax rate must be marked by colored dye. In the UK, the duty on "red diesel" – marked by a red dye – is up to 40 percent lower. It can only be used in the farming, fishing, and forestry industries.

Until 2006, the UK was permitted to offer a concession to pleasure boat owners under transitional rules. Yet it subsequently developed a regime whereby owners could continue to use "red diesel" if they acknowledged that they would only do so in UK waters.

The European Commission has raised concerns because the UK does not require fuel distributors to have two separate fuel tanks to distinguish between lower tax marked fuel and fuel subject to the standard rate. It alleges that private leisure boater owners can often find themselves in a situation where they can only purchase marked fuel. As a result, they may not pay the correct amount of tax.

According to the Commission, not only does this go against EU excise rules, it also puts owners at risk of heavy penalties if they are checked by foreign authorities when they travel to another member state.

TAGS: tax | marine | European Commission | United Kingdom | excise duty | travel and tourism | legislation | tax rates | tax reform | penalties | European Union (EU) | Europe

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