The tale of red diesel has taken another dramatic twist with confirmation that all the fuel you take on from 1 November will be hit with a VAT rate of just 5%. This is an abrupt shift in position from HM Revenue & Customs after briefing previously that 60% of your fuel would attract full VAT of 17.5%.

The reason for the about face is not known at present, but it is good news for boaters, and should mean prices stay below £1 a litre based on a current pump price of 70ppl. MBM is now seeking an explanation from HMRC, which has spent the last six months telling journalists and the boating industry to expect a full rate of VAT on a big slice of leisure boat fuel.

A HMRC insider said there had been "some confusion" with different versions of the brief, the correct version of which can now be seen on HMRC's website. The timing of this news certainly couldn't be more awkward for MBM, coming as it does just days after the November issue went to the printers containing HMRC's previous position. But while the VAT information in the issue may now be inaccurate, the rest of the information remains correct.

 

UK boat owners are facing a final season of low-cost red diesel as the Government announces its intention to enforce the full rate of duty for heavy oil. Unless duty is reduced in the upcoming budget, waterside diesel could rise to around £1.20 per litre as of 1 November 2008, making it more expensive than any road fuels. According to the RYA: 'The only real remaining issue is how the impact of increased diesel prices will affect the marine leisure industry and participation.' Executive Director of the British Marine Federation, Howard Pridding, said: 'While no-one is going to pretend that the duty increase on red diesel is a good thing, we are pleased with how HMRC has managed the consultation process and the position that they have finally adopted.'

 

 

The following quotes are from the document (linked above) titled: Impact Assessment of the implementation of the Energy Products Directive (EPD) on private pleasure boats published by HM Revenue and Customs following their consultations held 1 August -31 October 2007. 'Private pleasure vessels will continue to use marked fuel (red diesel) but at the rate for heavy oil, repaying the rebated duty via the fuel suppliers (RDCOs) who will declare this to HMRC. The rebated rate of duty is currently 9.69 ppl; the full rate is currently 56.94 ppl. 'An allowance for domestic use (heating) will be permitted.'  'RDCOs who supply fuel to private pleasure craft will be required to identify such sales, charge the higher rate of duty at the point of sale and pay this to HMRC when they submit their return.' 'In order for suppliers to satisfy HMRC that the correct rate has been charged they will need to keep records of their individual retail sales.'  'The loss of the derogation will increase the price of fuel for private pleasure boat use, which in turn could lead to a reduction in the number of suppliers.'

 

'The loss of the derogation increases the price of fuel for private pleasure boat propulsion which, other things equal, will reduce the amount of fuel used for this purpose. This has a direct carbon and environmental benefit.' Estimated size of fuel business: '750,000 private pleasure boating transactions a year' 'HMRC estimates that the revenue gain from the expiry of the boat derogation will be £10 to £15 million a year. Taken in the context of total hydrocarbon oils duty revenues of £25 billion a year, the private pleasure boat sector will account for a fraction of one per cent of total revenues.'

 

The forthcoming Budget statement on 21 March could reveal more details about the loss of Red Diesel.

The low-duty fuel will be lost to UK leisure boaters, probably sometime over the next year, but the Government is still working out a timescale.

The British Marine Federation and Royal Yachting Association met with HM Customs Officials on 7 March to review the matter and received "an update on Government thinking about how they propose to implement the European Commission decision to remove the Red Diesel derogation that was announced in December".

A statement from the BMF and RYA says: "Customs officials are currently working on implementation and enforcement proposals. BMF and RYA are confident that HMRC are fully aware of the issues and implications for the industry and boat user.

"Customs officials suggested that there could be an indication of the likely timescale for implementation in the budget statement being made in the House of Commons on 21 March.

"HMRC has confirmed that all potential options for implementing the Commission's decision remain under consideration. They are likely to bring forward proposals for full consultation after the Budget Statement."

 [Courtesy: ybw.com]

 

The European Commission has rejected the UK Government’s application to renew the UK’s derogation on red diesel for private recreational boaters.

 

What does this mean?
· Eventually leisure users will not be able to use rebated red diesel
· Suppliers and manufacturers will need to invest in new infrastructure (tanks,pumps etc)
· Fuel prices could potentially double increasing the overall cost of leisure boating.

 No need to panic
· There will be no immediate impact on the industry
· The government must consult and that will take time
· The changes need to be brought in via a Budget. Again this will take time

How are the BMF supporting the industry and boaters?
· They convinced the UK Government of their case and gained Government support
· They met with HM Revenue and Customs to determine the options for the way forward
· They are putting forward the case for a long transitional period

 What you need to know
· Until the law is implemented boat users will be able to continue to use lower duty red diesel as normal
· BMF’s opinion is that a fuel increase in 2007 will be unlikely