Red Diesel

21 Oct 2018 13:43 | Anonymous member (Administrator)

It’s slow demise?

Red diesel is taxed at a lower VAT rate (5%) for domestic purposes (heating, charging batteries, hot water, refrigeration etc) but at the full rate (20%) for propulsion - fuel duty already being included in the pump price (- got it?!).

To best comply with the full rate for propulsion, UK leisure boats have been declaring a voluntary 60/40 split between the different tax rates (i.e. 60% used for propulsion & 40% for domestics) - agreed across the board with HMRC.   However, a 20/80 (e.g. ‘live-aboards’) or any other split is possible if it can be justified.

EU rules say a "fiscal marker" (red dye in the UK, green dye in Ireland etc.) must be present in diesel not taxed at the full rate.  In May 2013 the EU Commission formally requested the UK to amend its legislation and ensure that “private pleasure boats, such as luxury yachts, can no longer buy lower taxed fuel intended for fishing boats".   HMRC challenged this request as being ‘impractical’ and so the Commission referred the case to the European Court of Justice (ECJ).

The ECJ has now concluded (17th Oct, Case 503/17) that diesel taxed at the full rate (i.e. for propulsion) should not be marked because it undermines the purpose of the marker and it has dismissed HMRC’s view that this is impractical.

No deadline has been set for when the necessary adjustments to accommodate this ruling must be made.  

But what about the effects of Brexit?

Watch this space!

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