The information on this page has not been updated to include changes resulting from the end of the Brexit transition period on 31 December 2020, the announcement in the spring budget on the use of marked 'red' diesel in the future in the UK and the difficulties this presents in Northern Ireland.
An update is being prepared and will be published as soon as possible.
Make sure you are buying the correct fuel, at the correct price, supported by the correct paperwork.
The EU Fuel Quality Directive was implemented in the UK on the 14 January 2011. This introduced the requirement for inland waterways vessels and recreational craft that do not normally operate at sea to be supplied with low sulphur fuel.
There is however nothing in this new legislation that compels a supplier to add bio-diesel (FAME) to fuel that is being supplied for use by pleasure craft no matter where it is used. Under the UK Renewable Transport Fuel Obligation (RTFO), it is only obligatory to add bio diesel to diesel supplied for use in road vehicles.
However, as of 15 April 2013, all low sulphur gas oil for use in non‐road mobile machinery (NRMM), including: inland waterway vessels which do not normally operate at sea and recreational craft which do not normally operate at sea will be subject to the RTFO.
The RTFO order obligates fossil fuel suppliers to produce evidence showing that a percentage of fuels supplied in the UK come from renewable sources and are sustainable, or that a substitute amount of money is paid.
That means that regardless of whether fuel contains biofuel or not, the volumes supplied will be used to calculate the volume of sustainable renewable fuel as a proportion of the overall volume of fuel supplied for road transport and NRMM purposes.
To ensure that renewable sources are sustainable, the amount of renewable fuel needed to meet the overall RTFO remains constant, the RTFO obligation for 2013/14, and subsequent years, will be reduced from 5% to about 4.74%.
This again has the potential to affect fuel supplied to pleasure craft. Fuel distributors have obligations to meet, but how they meet these obligations is up to them. They remain free to add more bio-diesel to some supplies and none to others; it should therefore still be possible to ask for diesel without any bio-diesel content.
However the move to obligate NRMM could mean that diesel supply has FAME in it. Most distribution terminals have facilities to store just three grades of distillate fuel. One is used for Kerosene, one for road Diesel, and the third has to cover both gasoil for NRMM and Stationary engines. It is quite possible therefore that road diesel will be marked and supplied for NRMM use.
In the UK fuel is chemically marked and dyed red to indicate that it has been supplied for non-road mobile machinery use, as in many cases such fuel is supplied at a rebated rate of duty.
Pleasure craft can still legitimately buy marked (red) diesel in the UK as long as the correct duty is paid on the element of the fuel to be used for propulsion.
The fact that this fuel is marked does not indicate the type of the fuel. Fuel known as red diesel may or may not be low sulphur fuel, dependant on its type and it may or may not contain a percentage of FAME (bio diesel).
The following table indicates which fuels you can legitimately purchase depending on whether you are boating in categorised waters (inland) or going to sea.
The red diesel you buy could be any one of the fuels listed:
Type of Fuel
Available to vessels which go to sea
Available to vessels which remain in categorised waters
||This is the specified standard for marine fuels which meets certain other stringent international requirements; it permits a maximum limit of 1,000 mg/kg sulphur and prohibits the use of Biodiesel
||Marine diesel or Red diesel
||Yes||No - they may only use low sulphur fuel|
|The UK Regulations that transpose the EU Fuel Quality Directive apply to the supply of fuel and do not apply to craft that normally, 'operate at sea'; the UK regulations allow marinas and other fuel retailers in tidal category C and D waters to stock and sell ISO 8217 Category DMA gas oil to recreational craft that normally operate at sea.
|BS EN 2869:2010 Class A2
||Gas oil for non-road use, including recreational craft that do not normally operate at sea and inland waterways vessels. This standard now specifies a maximum limit of 10 mg/kg sulphur but also permits the addition of up to 7% Biodiesel by volume (without it having to be labelled as such).
||Gas oil or Red diesel or Low sulphur diesel
||Up to 7% is permitted but not mandatory
|It is perfectly lawful for suppliers to provide this without the addition of Biodiesel for Non Road use and a number of suppliers have stated that they will make sulphur-free biodiesel-free gas oil available|
|Low sulphur diesel which contains up to 7% FAME Biodiesel has to be added as part of the Renewable Transport Fuels Obligation Order.||Road Diesel||Minimum of 4.25% for 2011/2012 is mandatory. This will rise to 4.7% when the RED is implemented||Yes||Yes|
Further technical information is available see page 5 of the RYA Fuel Quality Directive information leaflet.
It is the responsibility of the supply chain to ensure that fuel complies with the legislation depending on where it is sold. It is therefore important that every link in the supply chain knows what is being bought and sold. The best solution is to use fuel that is free from bio-diesel (“FAME-free”).
During and since the negotiations with DfT, the RYA has pressed the safety case and risks associated with bio-diesel and contamination. In response, the DfT and many fuel refiners, blenders and distributors have made a supply of BS2869:2010 fuel that is FAME-free available.
• Ask what you are being supplied with. Boat owners are encouraged to ask their supplier what standard of fuel they are supplying and whether or not the specific fuel supplied contains bio-diesel.
• Ask for FAME free fuel. If your Marina has a fuel point, make sure the operator is supplying FAME free fuel. Where a supplier either will not or cannot provide FAME free fuel, consider buying fuel elsewhere.
It remains perfectly possible that you may be supplied with BS EN 2869:2010 or BS EN 590 fuels containing a percentage of bio-diesel. If you think this is the case, you should be aware of the potential risks associated with bio-diesel. These can broadly be classified as operating and storage risks.
The key is to know what you are being supplied and the solution, to find a fuel source you are happy with. If your usual supplier will not provide fuel which is free from bio-diesel you have the option to buy your fuel elsewhere.
Still have more questions?
Contact email@example.com or 023 8060 4233.
Red diesel continues to be available at the waterside but recreational boaters must pay the full rate of duty when purchasing fuel for the purposes of propulsion. Red diesel used for domestic purposes such as heating or electricity generation, may be purchased at the reduced rate of duty.
How does the system work?
1. When recreational boaters buy diesel for their craft, they need to make a declaration to the supplier if they intend the fuel to be used for propelling a private pleasure craft.
2. The recreational boater must also declare what percentage of the fuel will be used for propulsion (as opposed to domestic purposes such as heating or electricity generation).
3. The wording prescribed by HMR&C for this declaration is:-
“I declare that [ ] % of the fuel purchased will be used for propelling a private pleasure craft.
I am aware that the Hydrocarbon Oil Duties Act 1979, which permits the use of marked diesel to propel private pleasure craft, only applies within UK waters. I acknowledge that nothing in that Act, or the making of this declaration, affects any restrictions or prohibitions that may apply to the use of fuel for propelling private pleasure craft outside UK waters, including any restrictions or prohibitions under the law of another Member State that apply within the waters of that Member State.”
Pursuant to the EU Energy Products Directive 2003/96, EU member states are free to impose their own rate of duty on motor fuel and heating fuel subject to minimum levels specified in the Directive. The Directive also provides that, except in very limited circumstances, member states are not permitted to levy different rates of duty on equivalent fuels.
In the Directive, express provision is made for motor fuel used for “the purposes of navigation within Community waters (including fishing), other than private pleasure craft”, heating fuel and fuel used for generating electricity on board a craft to be levied a reduced rate of duty.
The UK secured a derogation from this Directive to permit the UK to continue to levy a reduced rate of duty on motor fuel to be used for propulsion in private pleasure craft but that derogation expired on 31 December 2006 and the UK Government’s application for the derogation to be extended was rejected by the European Commission.
Since the end of the derogation, the UK has been obliged to levy the same level of duty on motor fuel used for propelling private pleasure vessels as it does for equivalent motor fuel used in other applications (such as road vehicles).
Although recreational boaters need to pay the standard rate of duty on diesel used for propelling private pleasure craft, recreational boaters are still entitled to buy diesel at the reduced rate of duty for use in non-propulsion purposes, such as heating, electricity generation, refrigeration, air-conditioning or providing domestic hot water.
This clearly presents difficulties for some private pleasure craft, such as those that are fitted with a generator or heater that runs on fuel supplied from the same fuel tank as the engine, those that use the engine alternator to charge domestic batteries or those in which the domestic hot water system or refrigerator compressor is driven by the engine. Similar problems may also arise for craft propelled by diesel-electric systems.
Working out the propulsion percentage split
How do we work out what percentage of fuel we intend to use for propulsion?
The EU Energy Products Directive specifically refers to ‘fuel for the purposes of navigation’ (which is reflected in UK law as ‘fuel for propelling’), so there is no legal basis for HMRC to impose a single standard apportionment to be applied universally that pays no regard to actual usage for propulsion.
However, HMRC’s advice for boaters on this issue is as follows:
“Q. What will be the allowance for fuel used on boats for heating and lighting?
A. There is no fixed allowance. It is for the purchaser to declare the percentage of fuel used for propulsion. However, analysis by both the industry and HMRC suggests that a split of 60% for propulsion and 40% for domestic use (heating, cooking etc) probably reflects most people’s use and it is therefore likely that many users will declare such an apportionment. This will make it easier for suppliers (RDCOs) to work out additional duty and VAT.
However, where a purchaser knows that their propulsion use may be more or less than the above apportionment split or a craft clearly has no domestic use, then they must declare their actual intended usage.
Q. What about residential boat owners where nearly all fuel is for domestic purposes – what can they declare?
A. We have recognised the status of residential boat owners whose primary residence is their boat. Some of these will be at fixed moorings or move just a very short distance along the tow path from permanent moorings.
If they live aboard the craft permanently and hold certain documentation, such as a Houseboat Licence, Residential Mooring Licence, Council Tax Bill in respect of the mooring, or other peripheral documentation, invoices or bills which provides proof of permanent residency, they may purchase all their fuel at the rebated rate (as if they were a commercial vessel).
They will still be required to make and sign a declaration saying that 0% of the fuel is for propelling purposes. It will be the responsibility of the declarant to ensure that they hold the requisite documentation should HMRC wish to check the validity of the declaration made in these circumstances. Continuous cruisers may not declare 0% under these arrangements, even if they reside permanently on their craft, they must declare their actual intended usage for propulsion.”
Registered Dealers in Controlled Oils (RDCO) will need to account to HMRC for the additional duty received from recreational boaters. RCDOs already owe a general duty of care to ensure that they only make supplies of controlled oil for legitimate uses.
Commercial users of red diesel may purchase red diesel at the reduced rate of duty. But what counts as commercial activity?
To help you define your activities we have provided guidance for clubs, training centres and charterers.
What is a “private pleasure craft”?
The definition of “private pleasure craft” for the purposes of the Energy Products Directive and the purchase of red diesel in the UK is defined in the Directive as:-
“Any craft used by its owner or the natural or legal person who enjoys its use either through hire or through any other means, for other than commercial purposes and in particular other than for the carriage of passengers or goods or for the supply of services for consideration or for the purposes of public authorities”
This definition has been inserted into to the Hydrocarbon Oil Duties Act 1979 (the primary legislation that governs the levying of duty on fuel oil in the UK) by the Finance Act 2008.
The definition of “private pleasure craft” is different from the definition of “pleasure vessel” used in UK legislation such as regulations made under the Merchant Shipping Act 1995, including the Merchant Shipping (Vessels in Commercial Use for Sport or Pleasure) Regulations 1998.
The definition of “pleasure vessel” is narrower than that of “private pleasure craft” so it is likely that some craft that are not “pleasure vessels” for the purposes of the Merchant Shipping (Vessels in Commercial Use for Sport or Pleasure) Regulations 1998 and therefore have to comply with the relevant Code of Practice will nevertheless still be “private pleasure craft” for the purpose of purchasing fuel.
Conversely, a yacht that is not certificated to operate commercially is unlikely to be able to claim that it is not a “private pleasure yacht”.
How the definition of “private pleasure craft” will be interpreted and how it will interrelate with the definition of “pleasure vessel” will be a matter for the Courts to determine in due course. We set out below, however, our understanding of how the definition of “private pleasure craft” might be applied in certain circumstances.
Likely to be regarded as a private pleasure craft, whether or not the charter is “commercial” and whatever the means of payment, if any
Unlikely to be regarded as a private pleasure craft if the owner/charter company provides a skipper, as this may equate to the carriage of passengers for consideration
Unlikely to be a private pleasure craft, as this may equate to the supply of services for consideration
Unlikely to be a private pleasure craft if the delivery is by professional crew on behalf of a yacht manufacturer, distributor or charter company; otherwise, likely to be a private pleasure craft
Club yacht used by members* Likely to be a private pleasure craft
Club committee boat* Likely to be a private pleasure craft
Club safety boat* Likely to be a private pleasure craft, although a coastal club may be entitled to reclaim the duty in accordance with HMR&C Notice 263 ‘Marine Voyages – Excise Duty Relief for Mineral (Hydrocarbon) Oil’
Club launch* Likely to be a private pleasure craft
* Many of these craft fall within the definition of "pleasure vessel" for the purposes of the Merchant Shipping (Vessels in Commercial Use for Sport or Pleasure) Regulations 1998 and do not need to comply with the applicable Codes of Practice. As such, it is likely that they would also be regarded as "private pleasure craft" for the purposes of buying fuel.
What about clubs that buy diesel on behalf of their members?
Clubs will need to register as a Registered Dealer in Controlled Oils (RDCO) (see HMRC Notice 192 for more information).
Clubs or recognised training centres that are RDCOs will be entitled to receive deliveries of diesel at the rebated rate but they will then be responsible for obtaining a declaration from those to whom the fuel is supplied and will need to account to HMRC for the additional duty received from recreational boaters. RCDOs already owe a general duty of care to ensure that they only make supplies of controlled oil for legitimate uses and any clubs or training centres that are RDCOs should contact HMR&C directly for additional information.
Guide to the calculation of duty and VAT under the new arrangements for illustration only.
The proportion spilt between propulsion and domestic usage will vary. VAT is charged at the reduced rate of 5% on fuel for propulsion and domestic use.
This example assumes a 60% (propulsion) and 40% (domestic) split for a purchase of 100 litres of red diesel (the price of diesel is assumed to be 80 pence per litre (ppl) which includes 11.14 ppl duty already paid to fuel supplier):
Basic fuel price
100 litres @ 80 ppl = £80
VAT @ 5% = £4
Basic price of fuel = £84
Propulsion calculation (i.e. 60%)
Additional duty payable = 46.81 ppl (57.95 ppl full rate of duty less rebated rate of 11.14 ppl included in basic fuel price)
60 litres @ 46.81 ppl = £28.09
VAT @ 5% = £1.40
Total additional duty and VAT payable for propulsion = £29.49 Transaction Total = £113.49
The RYA, together with the BMF and IWA have been working closely with Her Majesty’s Revenue and Customs (HMRC) since early 2007 to produce a pragmatic and sensible solution to the implementation of the end of the derogation. Prior to that, from 2003, we successfully lobbied Government to seek the retention of the derogation but this was rejected by the European Commission in favour of its tax harmonisation agenda. Once it was confirmed that the derogation had to come to an end, our key concerns were to: secure the continued availability of diesel at the waterside; minimise the impact on the boater and industry; and to avoid safety and environmental implications of transporting fuel by hand. In February 2008 HMRC published its outline proposals. We were pleased to see that our efforts had succeeded and that all of our concerns had been taken into account. From then we worked to ensure that the detail of HMRC’s proposals was as simple and effective as possible.
The BMF, RYA, IWA and HMRC were disappointed that the derogation was not renewed by the EC, despite what we all considered to be a very strong case. We also all agreed that the end of the derogation presented considerable difficulties in terms of implementation. We are very pleased, however, that we have been able to work together successfully on behalf of the industry and recreational boaters. HMRC has been very receptive to the concerns of suppliers and users and has managed the consultation process well.
HMRC understood our arguments about the potential difficulties for fuel suppliers in calculating duty and VAT – in particular for the smaller operators – when faced with customers claiming different percentages of fuel used for propulsion. HMRC also appreciates the concerns of users about the difficulty of calculating and apportioning their own intended usage accurately and their worries about unintentionally making an inaccurate declaration.
Contact firstname.lastname@example.org or telephone 023 8060 4223. Further information for Registered Dealers in Controlled Oils is available from HM Revenue & Customs on 0300 200 3700.