05 March 2008
The following position statement was received from the BMF today. As we feared the price of marine diesel is set to rise substantially on 1 November 2008.

RED DIESEL UPDATE

Last week, Government made an announcement regarding the outcomes of the consultation on Red Diesel.  Key features of the new scheme for charging duty on marine diesel to be introduced by Her Majesty’s Revenue and Customs (HMRC) with effect from 1 November 2008 will be:

Under the new scheme, HMRC envisage that boaters will ‘self declare’ whether they are a commercial or recreational vessel and recreational vessels will pay the full duty rate. Fuel used for heating purposes on board will continue to be sold at the rebated rate of duty and the retailer will take the owners word, again based on self declaration, on what proportion is for heating or lighting and what is for propulsion.

The full press release from the BMF can be found by clicking here

Following this statement I have taken the opportunity to discuss the situation further with HMRC and ask a number of questions which I address below.

Since the announcement of the loss of the derogation, all of our lobbying has been focused on minimising the bureaucratic and cost burden on our members who supply fuel.  We have argued strongly that finding some way of allowing boaters to continue to use red diesel would avoid the significant cost to waterside fuel suppliers of having to make changes to the infrastructure.  It is great news that Government has listened to us on this fundamental point. 

The Customs officials with whom we have been working have had the impact on the industry at the forefront of their thinking throughout their deliberations on how to implement the EU decision.  We have always known that if we could retain use of red diesel that there would be implications for members in respect of additional paperwork.  There is going to be a need for all fuel suppliers to become Registered Dealers in Controlled Oils (RCDOs). 

We have also made representations to HMRC about the potential for liability on fuel suppliers arising out of mis-declaration.  The proposals announced by HMRC last week placed all the declaration responsibility on the boat user.  Officials have confirmed that there cannot be liability issues for marine companies (unless they are acting criminally).  HMRC will now look at how this declaration process will work in practice and they intend to do so working with the benefit of our knowledge and experience.  The facts that we need to deal with are:-

It will be down to the customer to declare the percentages in respect of the above.  The fuel seller will have to do the price calculation bearing in mind that the VAT on propulsion fuel needs to be charged at 17.5% and VAT on heating fuel is 5%.  Customs officials fully understand that this is a complicated calculation and they want to work with us to design systems and paperwork to minimise the bureaucracy. A meeting has already been arranged to familiarise HMRC officials with waterside fuel operations.

The relationship between marine companies and their fuel suppliers will not change.  The duty will be applied at the point of sale to the public.

The BMF has again raised the issue of classification of commercial craft, particularly in respect of hire boats.  The EU Energy Directive classifies hire boats as private use. We have continued to put strong arguments for a review of this interpretation. HMRC officials have undertaken to discuss this situation with their Departmental lawyers. 

There are also issues about other member state administrations not recognising the continued use of red diesel by UK boaters.  HMRC are also looking into this situation. 

I hope this addresses some of the initial questions that members may have and gives confidence that HMRC are going to continue to work closely with BMF to bring about workable systems for final implantation by 1 November 2008.

Howard Pridding
Executive Director, British Marine Federation

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13 December 2006

Last week the European Commission REJECTED the UK government's application to renew the derogation on red diesel for recreational boaters. The European Commission has also rejected similar applications from Belgium and Malta.
This has met with an outcry among industry associations, charter companies and even some members of Parliament. As of January 1, 2007, all diesel used for private boating purposes is likely to be taxable at the same rate as road diesel. The ruling will effectively double the existing price of red diesel to around £1 per litre.

The EC did, however, leave an option for creating a separate tax rate for marine leisure fuel that would create a hike in diesel prices, but not a doubling.

The diesel application rejection also drew swift and sharp reactions in the House of Commons. Financial Secretary John Healey told the House of Commons about the rejection in a heated exchange with Northern Isles MP Alistair Carmichael .
Carmichael has been been active for years in trying to ensure the subsidies on diesel remained.

Healey told the Commons that he was well aware that the derogation permitting the use of red diesel in Britain is highly valued by private boat owners and users. "We put the strongest possible case to the Commission. We prepared that case in close cooperation and with contributions from many of the organisations affected. We could have done little more to press the case," he said. "I spoke personally with the Commissioner and have written personally to the Commission on this issue. There is no further stage in this process now."

Carmichael reportedly voiced the opinion that: "Private boat users have been the victim of New Labour prejudices. They clearly thought that they were dealing with a few rich people on their gin palaces. The opposite is true. This change will serve to exclude many people on low incomes from enjoying boat use."

The impact of the ruling will probably not take place immediately. Some believe that prices may not go up at least until June 2007

(Reproduced with kind permission of IBI magazine)

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12 December 2006

The British Marine Federation (BMF) and Royal Yachting Association (RYA) met with officials from HM Revenue & Customs yesterday to discuss the European Commission's rejection last week of the UK's application to retain the derogation for low-duty red diesel for private leisure craft in Britain.

According to a story on the Motor Boats and Yachting (MBY) website, yesterday's meeting was designed to ensure that Revenue & Customs fully understands the marine industry's need for a "lengthy transition period" before the price of diesel is increased next year. As of January 1, 2007, all diesel used for private leisure craft in Britain MAY be taxable at the same rate as road diesel, effectively doubling the existing price of red diesel to around £1 per litre.

However, BMF executive director Howard Pridding told MBY after the meeting that: "The price won't go up on 1 January. The reality is there will be a period of time in which boaters will continue to benefit from the low duty rate." He added: "We came away from the meeting content that Customs understands the need for a lengthy transition period."

Pridding also said that he expects a period of at least six months before the change could be implemented by the government alone. Moreover, a consultation phase would also have to take place before any action is taken.

(Reproduced with kind permission of IBI magazine)

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18 April 2006

Read the Governments' Regulatory Impact Assessment in the 2006 budget.

Click [here] for the document and turn to page 187.

28th March 2006

Red Diesel was a little publicised element of last weeks budget.

You may be forgiven for not being a huge fan of Gordon Browns tax regime over the past few years, but he has done all marine users, and the marine industry at large, a favour by agreeing to take the case for continued tax derogation to the EU later in 2006.

Our affiliation with the RYA, has paid dividends, and the efforts of the CQBHA members who lobbied their MP have made a huge difference in influencing a positive outcome. Some members are reporting that they have been given official written notification by their MP, that the UK will be applying formally to the European Commission to renew the derogation.

This means that there is now less chance that marine diesel prices will be taxed at road fuel rates from 2007, which would have meant that marine diesel prices could have doubled.

There is still some way to go yet before this is finalised. If the Commission accepts the UK proposal then it will be presented to the European Council Of Ministers for a vote by all member states later in 2006. This has to be agreed unanimously before the derogation will be renewed.

We will keep you up to date via these pages as things progress through the year.

You can read the Treasury response to CQBHA members and to the RYA by clicking [here]