Red Diesel: The History
The RYA fought a long battle to extend the derogation that allowed UK leisure boaters to use lower duty red diesel.
After much lobbying, the British government agreed in October 2006 to support our case. However, EU officials failed to accept the government's arguments and decided that the derogation should end.
Red diesel: life after derogation - information on the current tax regime for red diesel, taking red diesel abroad and other areas.
Ending the derogation on Red Diesel
RYA news story 12/09/08
Red Diesel: availability secured by common sense
RYA news story 29/12/08
Red diesel: self regulation provides best safeguard for availability
RYA news story 06/11/07
Government red diesel consultation offers cost effective solution
RYA news story 02/08/07
Using UK purchased red diesel in other EU states
RYA news story 15/06/07
RYA & BMF welcome budget statement
21/03/07
Red Diesel news pre-2006
Red Diesel: availability secured by common sense
RYA news story 29/12/08
The RYA and BMF (British Marine Federation) can now confirm that the 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:
Private users can continue to use marked fuel (red diesel) providing they make a simple declaration to the supplier and pay the full duty rate for heavy oil;
Registered Dealers in Controlled Oils (RDCOs) will be responsible for declaring the duty collected to HMRC; and, fuel purchased for domestic use (i.e. not for propulsion of the craft) can continue to be purchased at the rebated rate.
HMRC have yet to issue a public statement but have released to the RYA its Impact Assessment which is available in related links above.
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 owner's word, again based on self declaration, on what proportion is for heating or lighting and what is for propulsion.
Dave Fitzgerald, HMRC confirmed that the core policy had been fixed but that they would be working closely with RYA, BMF and other stakeholders in relation to developing the detail of the declaration process and apportionment of fuel for domestic use. Following that consultation process, HMRC will produce comprehensive guidance.
Neil Northmore, the RYA s Government Affairs Advisor, said: Since the decision was made to charge a higher rate of duty on red diesel, which required a new regime, we have been working hard with HMRC to find a sensible solution for all.
Our main concerns were availability and safety, and we were aware that there was a danger that some retailers in more remote areas would simply not bother selling to pleasure boats on the premise that it would be more trouble than it was worth to distinguish between private and commercial craft, and then process the paperwork.
The onus will be on the owner of the boat to self-declare whether they are a commercial or recreational vessel and pay the appropriate rate of duty at the pump. Anyone falsely declaring they own a commercial vessel may be subject to enforcement action by Her Majesty s Revenue and Customs.
Howard Pridding, Executive Director of the British Marine Federation, 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. There were real fears that the marine industry would be hit with significantly increased costs and administrative burdens but HMRC has listened to our concerns and come up with a system which the BMF feels able to support.
The proposed system spreads the burden between boaters and the industry in a fair way and hopefully will ensure that, with the industry able to keep the existing infrastructure, boaters will still be able to access fuel in convenient locations.
The campaign to secure future diesel supplies for recreational boaters has been running since 2003.
The RYA and BMFs work with the HM Revenue and Customs has been instrumental in ensuring diesel remains available, particularly in remote areas where the priority has always been supplying commercial vessels.
This solution ticks many of the boxes for recreational boaters. Availability will not be affected, which gets rid of the safety concern, and the potential for reams of paperwork or even registration of craft, to identify commercial vessels from recreational ones, has been minimised Neil added.
The only real remaining issue is how the impact of increased diesel prices will affect the marine leisure industry and participation. The RYA will continue to work with the Government to assess the impact of this.
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Red diesel: self regulation provides best safeguard for availability
RYA news story 06/11/07
The RYA (Royal Yachting Association) has submitted its response on behalf of recreational boaters to the Governments consultation on the future of waterside diesel, in which we have recommended that a system of self regulation be adopted as the basis for the new regime.
Under this system recreational boat owners would continue to purchase red diesel at the rebated rate but would declare and pay the additional duty periodically. Should HMRC choose a different system; where the suppliers of red diesel would collect the duty on sales to recreational craft, then there could, we believe, be a detrimental effect on supply.
Our overriding consideration throughout the red diesel debate has been safety; securing the ongoing availability of marine diesel throughout the UK, says Neil Northmore, RYA Government Affairs Adviser, The self regulation system, we believe, offers the best system in terms of safety because it will safeguard the supply and availability of red diesel throughout Britain.
Neil Northmore: We know that suppliers in remote or rural areas, such as Scotland and the south west of England, have indicated that they would not sell red diesel to private recreational craft because they do not want to be burdened with the cost and bureaucracy involved in recording every sale to private recreational craft.
The RYA has also urged Government to look seriously at reducing the rate of duty payable by recreational boaters on red diesel to the lowest possible rate, ideally the EU minimum rate. The proposal at present is that red diesel would be taxed at the full, road fuel rate of duty; 54.68ppl. We will continue to press Government on this issue.
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Government red diesel consultation offers cost effective solution
RYA news story 02/08/07
The Government has this week published a consultation on red diesel which holds out hope for boaters and the marine industry by potentially allowing red diesel 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.
HM Revenue and Customs have opened their consultation on the new regime set to replace the current reduced rate of duty marine diesel used by pleasure craft.
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.
When the changes to fuel duty for private pleasure boats were announced by the Chancellor of the Exchequer in November 2007 Ministers said that they would look for ways of implementing the new regime which would both minimise the impact, and ensure that any additional compliance burden was as small as possible.
Neil Northmore, RYA Government Affairs Adviser said: The options laid out in the consultation paper certainly do seem to focus on minimising the impact. We are pleased that both recreational boaters' 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 said: 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.
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Using UK purchased red diesel in other EU states
RYA news story 15/06/07
Following the news of a recently publicised case of a British yacht stopped by Dutch Customs Officers and fined due to the red diesel in its tanks, and an equally publicised erroneous communication between the Dutch Embassy and UK Revenue and Customs, the RYA has reiterated its advice to British boaters planning to take their vessels containing red diesel to other European countries.
According to the RYA s latest information received from the European Commission regarding the purchase of red diesel in the UK before 1 November 2008:
In case of fuel transported in the normal fuel storage tank, the excise duty is chargeable in the Member State of acquisition according to the national rules. It falls upon the Commission to enforce the compliance of national legislation with Community law. Consequently, in the meantime, people can acquire red diesel in the UK and use it legally in another member state of the European Union, if transported in the normal fuel storage tank
In plain language this means that because it is currently legal to buy red diesel in the UK for use in pleasure yachts, and will be until November 2008, if a yacht travels to another EU state with UK-purchased red diesel in its own permanently installed tanks, and can prove that diesel was purchased in the UK, that yacht is acting lawfully and does not owe any further duty to that EU state.
Without such proof of purchase or if fuel is stored outside the integral fuel tank (e.g. in jerry cans), however, the authorities in other EU states may be entitled to levy a charge on the use of red diesel within their waters.
We are not aware of any instances of yachts carrying UK-purchased red diesel in integral tanks with proof of purchase by reference to invoices and logged engine hours etc. being fined by authorities in other EU member states. If we are informed of any such instances then we will, of course, investigate and contact the relevant authorities.
We are also aware of threads of postings on various forums to the effect that the Embassy of the Kingdom of the Netherlands has issued guidance that differs from that set out above. We have been in contact with the Embassy, however, and we are assured that the quoted guidance is not Netherlands Government policy and was based on a discussion between the Embassy and UK Revenue and Customs. The RYA has been working with UK Revenue and Customs on the issue of red diesel for several years and we will now seek to ensure that the Embassy receives the correct information regarding the status of red diesel in the UK.
In the meantime, the RYA does not advise UK yachts carrying red diesel in their tanks to take extreme measures such as avoiding ports in the Netherlands but we would reiterate the contents of our guidance note on the subject.
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RYA & BMF welcome budget statement
21/03/07
The RYA and BMF have today welcomed the Government's proposals for the implementation of the new regime for duty payments on red diesel used by private recreational craft.
In today's Budget statement (Wednesday 21 March) the Chancellor announced plans to implement the ending of the derogation on fuel duty, in line with the recent EU directive. From 1 November 2008 fuel used for the purposes of private pleasure boating will no longer benefit from the current reduced and exempt rates of duty. In addition, a formal consultation on new regimes will be held later in the year.
The Chancellor s decision means that the current infrastructure for diesel fuel storage and sale can remain in place until 1 November 2008.
We welcome the decision to consult on the new regime and to keep existing arrangements in place during the consultation period says the RYA s Government Affairs Advisor, Neil Northmore, who has led the Association s involvement in the campaign. While Brussels original decision to end the derogation was disappointing, the UK Government has listened to our concerns.
BMF Executive Director Howard Pridding commented "I am pleased that the Government has listened to our case for a lengthy transitional period in order for industry to manage the infrastructure changes that will be required. The implementation date of 1 November 2008 will give marine businesses the time to plan and budget for that change. We will continue to work with Government over the coming months as they develop the detail of the new legislation."
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Red Diesel news pre-2006 13/12/06
On Thursday last week it was announced that UK leisure boaters were to lose their ability to use low-duty red diesel.
The European Commission rejected an application to extend a derogation allowing use of the fuel. The current derogation runs out on 1 January 2007.
Neil Northmore, RYA Government Affairs Adviser reports
We met with HM Revenue and Customs (HMRC) officials this week together with the British Marine Federation (BMF) to discuss the Commission's decision and find out Government's initial thoughts on timescales and process.
At this stage it is clear that the price will not go up on 1 January 2007. The reality is there will be a period of time in which boaters will continue to benefit from the low duty rate, and the earliest this can change is Summer 2007.
Changes can only be bought about through primary legislation i.e. the Finance Bill and it is highly unlikely that they will be in a position to do this in the next Finance Bill, which is due April 07.
To give a clear timescale is hard at this stage for Government as they are currently planning how to take matters forward. It is clear that further technical research into the implications of the change from low duty red diesel is required, and there must be implementation planning for the transitional period. It will also be necessary for the Government to conduct a public consultation at some stage next year.
The RYA is urging Government not to rush the decision and to exercise all due diligence to ensure that new measures are reasonable.
Together with the BMF we are working closely with HMRC and will keep you updated on any developments .
Seeing red - disappointing news for boaters 08/12/2006
The news yesterday that the EU Commission has rejected the UK s application for the retention of the current derogation on red diesel is very disappointing. It will be the catalyst for major changes that will affect all of us involved in recreational boating.
The Seeing Red Campaign, pushed by the RYA, the British Marine Federation (BMF) and the Inland Waterways Association (IWA) was successful in so much as it helped the UK Government to recognise and accept the problems that the loss of the derogation would bring and to fight for the derogation to be retained. However, despite the considerable efforts of the campaign partners and the Government, we were unable to halt the EU s march on tax harmonisation.
What happens now?
Although the derogation officially ends on 31 December nothing will happen for the moment. The government has to work out what measures are necessary, how to enforce them and in what timeframe this will take place. The Treasury Minister, John Healey, made it clear to the Commissioner that the UK will need a transitional period in which to implement the changes required. The Commissioner acknowledged this but ultimately the Commission has to agree to such transitional arrangements.
So what does this mean for us now?
Some of the key issues which face us all are:
The future availability of white diesel at our docksides, particularly in rural/ remote areas where red diesel is likely to remain the only fuel available at the waterside
How Government tackles enforcement fairly given that our fuel systems will still have red dye in them for many years to come
The impact of a more than twofold increase in fuel prices and significant compliance costs on the overall cost of our boating
The impact these increased boating costs will have on marinas and boatyards together with security costs and investment in new infrastructure (tanks, pumps etc.)
So what happens next?
We have already arranged meetings with HMRC officials and the Treasury Minister so we can start the consultation process and move forward in a pragmatic and informed manner. RYA members and affiliated clubs will play an important role in helping to identify what steps are necessary in the various RYA regions, and we will be seeking their input after our meetings with Government officials.
Red diesel - derogation is not renewed
07/12/2006
The Treasury Minister, John Healey, confirmed today that the European Commission has rejected the UK Government s application to renew the UK s derogation on red diesel for private recreational boaters.
This decision is naturally very disappointing. Despite the best efforts of the campaign leaders, RYA and British Marine Federation (BMF), and the efforts of the UK Government, it appears that the Commission was intent on removing the derogation at any cost and has dismissed the consequences to the UK marine industry and the private recreational boater says Neil Northmore, RYA Government Affairs Advisor.
Boaters could face a substantial increase in the price of marine diesel warned Howard Pridding BMF Executive Director, which will have a huge adverse impact on the UK marine industry. It is profoundly disappointing that the EU has not listened to the UK Government .
The RYA and BMF welcomed the Minister s acknowledgement of the problems that will flow from this decision, and has confirmed that the UK Government will consult with boating organisations to develop and implement a sensible timetable for transitional measures to alleviate the effects on the boater.
The RYA and BMF will continue to work closely with Government and their respective members to ensure that key issues of cost, availability and safety are addressed by the transitional measures.
Derogation debate 07/12/2006
(House of Commons transcript from Hansard)
5. Mr. Alistair Carmichael (Orkney and Shetland) (LD): What recent progress has been made in negotiations to extend the derogation from EU regulations to enable UK pleasure boats to use red diesel in 2007; and if he will make a statement. [104886]
The Financial Secretary to the Treasury (John Healey): I know that the derogation that permits the use of red diesel in Britain is highly valued by private boat owners and users. Thirty-four separate derogations from the directive are held by member states. None has yet been approved by the Commission and 14 have been rejected so far. Late yesterday afternoon, it was confirmed to me that the Commission had decided not to renew the UK s application for a fresh derogation for private boats. I know that will be unwelcome news. As we have argued to the Commission, it could be highly complex and costly to implement the measure, so today I asked officials to meet concerned and affected organisations soon to discuss the implications of the Commission s decision.
Mr. Carmichael: I thank the Minister for that answer, and he is right that the terms of the Commission s communication to the Council of the European Union are disappointing. Is he telling the House that that communication effectively kills the application for the derogation, as it is, of course, a communication to the Council? What can we do to ensure that the necessary pumps and facilities will be put in place in every marina and pier that will require them before 1 January? I have pursued the Minister on that point for a number of years. The issue could have been dealt with much more quickly and much sooner, if he had had the backbone to deal with it.
John Healey: We put the strongest possible case to the Commission, and we prepared that case in close co-operation with, and with contributions from, many of the organisations affected. We could have done little more to press the case. I have personally spoken with and written to the Commissioner on the issue, but there is no further stage in the process. First, we need to discuss the implications of the Commission s decisions. Secondly, we will consult widely on implementing the directive. Thirdly, we will have to legislate, and implement the changes. I made it clear to the Commissioner that it is important to allow the UK a suitable period in which to translate the Commission s decision into the implementation of the changes required. The Commissioner acknowledged that point, and we will work with the boating associations on that in the coming months.
Rob Marris (Wolverhampton, South-West) (Lab): The derogation relates to pleasure boats, but not working boats. Can my hon. Friend tell me how much tax revenue is forgone each year because of the red diesel tax concession for those engaging in aquatic leisure pursuits?
Hon. Members: Answer!
John Healey: It is fair to say that my hon. Friend has not been one of the strongest proponents for continuing the derogation. He is right that the derogation applies to private boat owners. Commercial boat owners and commercial interests will continue to benefit from reduced rates of duty on fuel. The revenue that we expect to gain if we are forced to implement the three derogations that we currently hold and we have applied to the Commission for their renewal totals about 10 million. The revenue gain is totally out of proportion to the cost of implementation, the complexity that may result for the industry, and the disadvantage to users. That was the core of the case that we put to the Commission, and I am disappointed that it rejected continuing the derogation for private boat owners.
Mr. Robert Goodwill (Scarborough and Whitby) (Con): The decision will be met with great dismay in marinas in ports such as Scarborough and Whitby. Does the case not expose the myth of the UK veto on taxation matters? A stealth tax is being imposed on us by the European Commission, against the wishes and the request of the British Government. Who runs Britain?
John Healey: I know the hon. Gentleman s constituency well and I recognise the concern that will be felt in Scarborough and Whitby. However, I must point out to him the source of the derogation. The principle that road fuel level duty should be applied to private boat owners was agreed not in 2003 under the energy products directive, but in 1992 under the mineral oil structures directive, by the previous Government.
Mr. Brian Jenkins (Tamworth) (Lab): I am sure that my hon. Friend will know that, as has been stated, the new regulation will be impossible to police, and it will add a further burden to our law enforcement agencies. However, is it not about time that we woke up to the fact that red diesel is outdated? It is just as polluting and bad for our environment as ordinary diesel. Should we not work towards cutting out red diesel? To meet the costs that that would mean for the industry and users, we could come to some tax arrangements that would allow us to phase in that change over the next decade.
John Healey: My hon. Friend is right that, in some respects, red diesel is more polluting than mainstream fuels. He will have noted that, yesterday, my right hon. Friend the Chancellor announced a special duty rate in the pre-Budget report to encourage rail operators to use biofuels mixed with red diesel to reduce the environmental impact. Red diesel is valuable to many commercial sectors that have been given permission to use it. The consequences of moving away from red diesel would be profound, but in the case of the derogation that we are considering this morning, its environmental impact is negligible, which was part of our case to the Commission for retaining it.
Application to EU announced
18/10/06
The Government has announced that it has submitted the UK s application to the European Commission to retain the derogation for red diesel used by private pleasure craft.
John Healey (Treasury Minister) said that the Government believes that removing this derogation would provide no significant revenue or environmental benefits to the UK
The announcement follows months of working closely with Government officials by the RYA and BMF to ensure that the UK presented the best possible case to the Commission for an extension. John Healey acknowledged this work saying:
In putting together our applications we have benefited from a great deal of helpful co-operation and advice from UK boating organisations, whom I would now like to thank for helping us to prepare the strongest possible application.
The next step is for the European Commission to respond to the UK s application for renewal with a proposal to the EU Council of Ministers who must agree unanimously in order that the derogation be retained.
The lateness of the Commission in setting the handling procedures for applications may in itself be a possible ground for extension of the derogation. Or alternatively the Commission may grant a temporary extension for a short period to allow it time to consider the applications from Member States. The RYA believes that a temporary extension may well lead to further uncertainty and is best avoided, but we should prepare ourselves for such a possibility.
The more pressure the Commission receives the more likely it is that the Commission will acknowledge the strength of feeling on this matter, and recognise the impact the loss of the derogation will have on UK boaters. It s not too late to add your support to this campaign. Urge your MEP to write to the Commission, in particular to:
Tom Carroll, Head of Unit,
Excise duties and transport,
Taxation and Customs Union D-G,
European Commission Rue Montoyer 59,
Brussels, BE-1000, Tel
+32-2-295.58.42 RYA & HMRC meet again
10/08/06
The RYA has now met with officials from HM Revenue and Customs (HMRC) to discuss the latest position on the red diesel derogation.
The RYA is pleased to note that despite the Commission s discouraging initial response, UK Ministers continue to believe that there is a strong enough case to support the renewal of this derogation. We also believe that Governments in other Member States with similar derogations will similarly be pressing for renewal. The RYA will continue to work with Government officials to ensure the UK s arguments are as strong as is possible. We understand the Commission has set a deadline in mid October for receipt of all applications for renewal so time is of the essence, but it is not an unrealistic target.
A spokesman for HMRC, states:
"As required under the Energy Products Directive, the Commission issued a Communication on 30 June stating its position on the derogations, and noting that Member States may apply under the normal procedures for renewal of derogations. As announced at the Budget, the UK will be submitting an application for renewal of the derogation enabling pleasure boats to use red diesel. This application will be informed by the case that the government has set out in the partial RIA and is continuing to build with the cooperation of the boating industry.
Ultimately, approval of the application will require the unanimous agreement of the EU Council of Ministers to a proposal from the European Commission. However, we believe that the RIA makes a convincing case for renewal and will carry on working with boating organisations and other Member States over the coming months to ensure that the application presents the strongest possible arguments for retaining the derogation."
The RYA is also aware that there has been some questioning by Member States over handling procedures by the Commission for renewal of derogations. We expect that this dispute will soon be resolved, but the lateness of the action by the Commission may in itself be a possible ground for extension of the derogation.
It is possible that the Commission may grant a temporary extension for a short period to allow the Commission time to consider the applications from Member States. The RYA believes that a temporary extension may well lead to further uncertainty and is best avoided, but we should prepare ourselves for such a possibility.
If RYA Members or Clubs want to add their further support to this campaign by bringing pressure to bear on the Commission then people should urge their MEPs to write to the Commission, in particular to:
Tom Carroll, Head of Unit,
Excise duties and transport,
Taxation and Customs Union D-G,
European Commission Rue Montoyer 59,
Brussels, BE-1000, Tel +32-2-295.58.42 ,
The more pressure the Commission receives the more likely it is that the Commission will acknowledge the strength of feeling on this matter, and recognise the impact the loss of the derogation will have on UK boaters.
European Commission's reaction 4/7/06
The RYA is disappointed by the European Commission s initial response to its campaign, supported by the Government, to extend the current derogation for fuel used in recreational craft for navigation. In its response, which is not yet final, the Commission states that a number of current derogations "go clearly against the objective of the Energy Tax Directive which requires that such uses are taxable.
Edmund Whelan, RYA Legal & Government Affairs Manager said Much work has already been invested into protecting Red Diesel over the past months and years. We will continue to campaign and influence the European Commission on the benefits of preserving the derogation before their final conclusion and prior to the Council of Ministers decision later in the year.
The decision follows the completion and submission of The Initial Regulatory Impact Assessment, which was prepared by HM Revenue and Customs with input from the RYA, BMF and FPS and was sent to the European Commission by John Healey, the Treasury Minster.
Budget reaction
22/3/06
Gordon Brown's pre-budget report announcement in November 2005, that the Government was minded to apply for an extension of the derogation for fuel used in recreational craft for navigation, was a great outcome for the RYA and BMF after years of joint campaigning and lobbying. Further to the Budget announcement, it's clear that the Government is committed to making a convincing case for renewal of the derogation.
RYA members and other UK boaters who have written to their MPs and the Treasury have played no small part in the turning of the tide on this issue. For those who have ever questioned the efficacy of writing to their MP on such issues, please see the attached letter from the Financial Secretary to the Treasury, (in Related Links above) which clearly states the important part RYA members have played so far.
However, work to secure the extension at the European Commission is far from complete and both the RYA and BMF have spent the months since the announcement working closely with Government officials to ensure the UK presents the best possible case to the Commission for an extension.
The Partial Regulatory Impact Assessment, which has been prepared by HM Revenue and Customs with input from the RYA, BMF and FPS is now complete and has been sent to the European Commission by John Healey, the Financial Secretary to the Treasury. Although this is the first stage in the European negotiations we hope that the Commission will view the request favourably at this early stage. If the Commission does not accept the proposals put forward in the Initial RIA, the RYA and BMF will continue to work with officials to present further evidence, as required.
If the Commission accepts the proposal to extend the derogation then it will still have to go before the European Council of Ministers later this year for a vote by all Member States. The outcome of this vote cannot be predicted in advance, so it is important that we continue to raise the profile of this important issue, both within the UK and among other EU Member States.
HM Revenue & Customs is grateful for the input from the RYA and BMF into drawing up the RIA, as detailed from today's release: "Their expertise in this area has been of great help and we have learnt much from working with them on this".
For further information contact the Legal Department Email:
legal@rya.org.uk.
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