OTS Group proposition on HMRC changes to use Rebated Fuels 1st April 2022.
HMRC Statement
“The government has announced that most machines and vehicles will no longer be able to use rebated (red) diesel and rebated biofuels from 1 April 2022. From this date, we will move away from the current approach of allowing rebated diesel and biofuels to be used in any machine that is not a road vehicle, including certain types of vehicles used mainly off-road. Instead, rebated fuel use will be limited to certain machines, vehicles, or vessels and only when used for specific purposes.
Those no longer able to use rebated fuel in diesel-powered machines or vehicles will be required to use diesel or biofuels on which the full rate of fuel duty has been paid.
The rebated fuels affected by these changes are rebated (red) diesel, rebated Hydrotreated Vegetable Oil (HVO), rebated biodiesel and bio blend, and fuel substitutes. HVO is a liquid hydrocarbon which is classified for excise purposes as heavy oil and treated the same as diesel. Biodiesel, bio blend and fuel substitutes are already subject to fuel duty when they are set aside to be used in an engine, motor, or machine. From 1 April 2022, they will also be liable to fuel duty if they are used for heating purposes. The rebated rate of fuel duty rate will apply when used for non-commercial heating, and the full rate of fuel duty when used for commercial heating”
Rebated Fuels can be used from 1st April 2022 for the following industries:
Preparing for 1 April 2022 – Fuel users
From 1 April 2022 it will be illegal to put rebated fuel into the tank of a vehicle, vessel, machine or appliance that is not able to use it. As set out above, the use of rebated fuel will be significantly reduced from 1 April 2022.
If you are no longer able to use rebated fuel, you should plan to run down the fuel in your vehicles or machine to close to nil before 1 April 2022. You must not use rebated fuel from 1 April 2022 and must instead use fully duty-paid diesel or biofuels.
“You will not be expected to flush out all traces of rebated diesel from the fuel tank of a vehicle or machine.”
Rebated fuel in storage tanks
If you are currently able to use rebated fuel but that is changing from 1 April 2022, you should plan to use up any stock of fuel held in storage by this date.
You will not be expected to flush out all traces of rebated fuel from your storage tanks, but you should plan to more or less empty your tank and use fully duty-paid diesel or biofuels when putting fuel into your vehicle or machine after the rules change. Any surplus rebated fuel in your storage tanks after 31 March 2022 may be:
Emergency back-up power generation used in commercial premises
Rebated fuel can be used for power generation in premises being used for non-commercial purposes but cannot be used in premises used for commercial purposes.
You will not be expected to flush out all traces of rebated fuel from the fuel tanks of back-up generators or storage tanks.
You may use up rebated fuel after the rules change for the purposes of emergency back-up power generation in premises being used for commercial purposes. However, you will need to be able to satisfy HMRC officers that the fuel was purchased when the generator was allowed to use it, and you had no reason to believe at the time of that purchase that the fuel would not be used legally in your generator. An example would be where the fuel was bought before the April 2022 changes were confirmed.
HMRC’s approach to compliance
For those vehicles, vessels, machines, and appliances able to use rebated fuel up to 1 April 2022 but not after, there will likely be a period between the rules changing and the rebated fuel in the internal tank or engine of the machine being used up. How long this will take will depend on the type of vehicle/machine, the size of its fuel tank and the rate of fuel consumption.
HMRC may carry out checks on any vehicles or machine using diesel to confirm the correct fuel is being used. If, after 1 April 2022, HMRC find traces of fuel markers in the fuel supply of a vehicle or machine that is not able to use it, you may be asked to provide evidence to demonstrate that any rebated fuel in the vehicle or machine was put in before the rules changed and is still being used up.
You should be able to demonstrate that you have been refilling with the correct fuel since the rules changed by retaining invoices or receipts showing purchase of fully duty-paid diesel or biofuels.
As mentioned above, if you use a vehicle or machine for both allowed and non-allowed purposes after the rules change, you must either flush out the tank to remove all traces of rebated fuel when switching uses, or refill with fully duty-paid diesel or biofuels for all of your use. You should retain the necessary evidence to demonstrate the steps undertaken where vehicles and machines are used for allowed and non-allowed purposes. For example, if you hire a vehicle or machine which can use rebated fuel for specific purposes, you will need to retain evidence to confirm the correct fuel has been put into the fuel tank. HMRC will consider what purpose the vehicle or machine was being used for at the time of inspection and whether this was an allowed purpose.
Where vehicles or machines are found to be running on rebated fuel unlawfully, they are liable to seizure. However, HMRC officers will have the discretion to disapply the liability to seizure providing the user can demonstrate to the officer’s satisfaction through invoices/receipts that they have not put rebated fuel into the fuel tanks after the rules changed.
HMRC do acknowledge there will traces of rebated fuel in tanks after the rules change. HMRC officers will take a pragmatic approach to enforcement, considering the steps you have taken to switch to using fully duty-paid diesel or biofuels. HMRC will target users who deliberately or knowingly use rebated fuel illegally. Therefore, if HMRC officers have evidence or reason to believe you have put rebated fuel into your vehicle or machine intentionally or recklessly after the rules changed, you may be subject to the civil or criminal sanctions set out in Section 6 of Excise Notice 75: Fuels for use in vehicles. Offences include, for example, the taking in or misuse of rebated fuel in a vehicle or machine for use as fuel when not allowed to do so and misuse related to the supply of rebated fuel.
OTS Group – Guidance
Industry Best Practice
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