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HM Revenue and Customs Brief 23/10

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Issued 10 May 2010

Excise duty: relief scheme for biodiesel produced from waste cooking oil

This brief replaces Revenue & Customs Brief 18/10. A reference is added to explain that the relief scheme is being implemented under the State Aid General Block Exemption regulation No 800/2008.

Purpose of this brief

This Revenue & Customs Brief provides information on a relief scheme being introduced on 1 April 2010 for biodiesel produced from waste cooking oil. From 1 April 2010 duty rates for biodiesel and bioethanol are being increased to the same level as conventional petrol and diesel, but waste cooking oil will continue to benefit from a 20 pence per litre (ppl) duty differential for a period of two years.

Who needs to read this?

Producers of biodiesel from waste cooking oil who are liable to pay biofuel duty.

Background

With effect from 1 April 2010, the duty rates for biodiesel and bioethanol are being increased to the same level as conventional petrol and diesel, as the Renewable Transport Fuels Obligation (RTFO) becomes the main support mechanism for biofuels. However, biodiesel produced from waste cooking oil, also known as used cooking oil will continue to benefit from a 20 ppl duty differential for a limited period of two years.

The decision to maintain the duty differential for biodiesel produced from waste cooking oil is being implemented by the introduction of a relief scheme. The scheme, being introduced on 1 April 2010 to coincide with the increase in duty rates, allows producers of biodiesel from waste cooking oil to off-set an allowance of 20 ppl against duty that is payable. The net effect of the relief is that producers of biodiesel from waste cooking oil will be paying duty at a rate that is 20 ppl less than the rate on biodiesel from other sources prescribed in section 6AA(3) of the Hydrocarbon Oil Duties Act 1979.

Who is eligible to claim relief?

Producers of biodiesel from waste cooking oil who are approved under the Excise Duties (Deferred Payment) Regulations 1992, or who are liable to pay biofuels duty in accordance with the Biofuels and Other Fuel Substitutes Regulations 2004.

Producer means a person who sets biofuel aside for a chargeable use or who makes a chargeable use of biofuel, with the consequence that biofuels duty is charged.

Chargeable use means as fuel for any engine, motor or other machinery, as additive or extender in any substance so used, or for the production of bioblend.

Has there been any change to the definition of biodiesel?

No. Biodiesel continues to be defined as diesel quality liquid fuel that is produced from biomass or waste cooking oil, the ester content of which is not less than 96.5 per cent by weight, and the sulphur content of which does not exceed 0.005 per cent by weight or is nil. However, relief is only allowed in relation to biodiesel that has been produced from waste cooking oil and on which duty has been charged (that is, the biodiesel has been set aside for a chargeable use).

How is the relief to be calculated?

The amount to be off-set against duty that is charged is to be calculated according to the following formula:

(A - B) x V

  • where A is the duty rate on biodiesel specified in HODA (from 1 April 2010, this will be the same rate as for heavy oil)
  • B is A minus 20 ppl
  • V is the volume, in litres, of biodiesel produced from waste cooking oil

The net effect of the relief is that producers of biodiesel from waste cooking oil will be paying duty at a rate that is 20 ppl less than the rate on biodiesel from other sources.

Will biodiesel produced from waste cooking oil have its own tax code?

Yes, the tax code for biodiesel produced from waste cooking oil will be 580. The tax code for all other types of biodiesel is 589.

How do I actually claim the relief?

If you are eligible to claim the relief and you submit an HO10, you should use the appropriate line in Part 1a (Tax code 580: Biodiesel produced from waste cooking oil) to declare the duty less the relief, calculated using the formula given above.

If you submit a HO 930, complete the row that says ‘Other’. You should add the tax code (580) in the first column and in the description box add ‘biodiesel from waste cooking oil’. The amount of duty due should be the duty that is charged on that quantity of biodiesel less the relief, calculated using the formula given above.

What evidence will HMRC require that the biodiesel has been produced from waste cooking oil?

HM Revenue & Customs (HMRC) will require documentary evidence that the biodiesel on which relief has been claimed has been produced from waste cooking oil. An example of a document is a Waste Transfer Note (WTN) which must accompany the transfer of waste.

HMRC will not be prescriptive on types of documents.

Do I need to submit evidence for my relief claim with my return?

No. Please keep your documentary evidence as part of your records. HMRC will contact you should they wish to verify your claim.

What if I produce/blend biodiesel from various feedstocks?

You will only be able to claim relief in relation to biodiesel produced from waste cooking oils.

What if I produce less than 2,500 litres per annum and am classified as an exempt producer?

The provisions relating to small producers are not affected.

How will imported biodiesel be treated?

In the same way as home produced biodiesel. Provided satisfactory evidence can be provided that the biodiesel has been produced from waste cooking oil, relief may be claimed.

Will off road biodiesel be affected?

No. Biodiesel used other than as road fuel will continue to be subject to a rebated rate of duty as is currently the case.

How long will the relief be for?

The relief scheme will come to an end on 31 March 2012.

This relief scheme is being implemented under the State Aid General Block Exemption regulation No 800/2008 Reference X182/2010.


About the Author

© Crown Copyright 2010.

A licence is needed to reproduce this article and has been republished for educational / informational purposes only. Article reproduced by permission of HM Revenue & Customs under the terms of a Click-Use Licence. Tax briefs are updated regularly and may be out of date at time of reading.



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Article Published/Sorted/Amended on Scopulus 2010-06-18 15:21:13 in Tax Articles

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