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HM Revenue and Customs Brief 45/08

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HM Revenue and Customs -Tax Authorities

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Issued 19 September 2008

Expiry of derogation on waste heavy oil

If you process waste heavy oil, you will need to become approved as an oil producer by 1 November 2008, if you are not already registered as one. From that date, your activities will fall within the meaning of 'production' under the Hydrocarbon Oil Duties Act 1979, as amended by the Finance Act 2008. When waste-derived fuel is used as heating fuel or as fuel for any engine, excise duty will be due at the fuel oil rate.

Background

The EU derogation allowing the UK not to charge duty on waste heavy oil used as fuel came to an end on 31 December 2006. Legislation was introduced in the Finance Act 2008 and, with effect from 1 November 2008, heavy oil (including waste oils or petroleum fuels derived from waste oil) which does not meet the fiscal definition of kerosene, gas oil or fuel oil will attract the rebated rate of duty for fuel oil when put to a heating use or used as fuel in an off-road engine. Currently, the rate is 9.29 pence per litre. If used as road fuel, the rebated rate, that is the fuel oil rate, does not apply, and the full rate of duty, currently 50.35 pence per litre, is due. Please check the rates page of our website to ensure you use the correct rate, as all rates are subject to change.

Outline of the scheme

Approvals

If you undertake activities that are considered to be oil production, such as the application of heat, vibration, pressure or the addition of chemicals, you must register your premises with us before 1 November 2008 in order to ‘make entry’ of premises, plant and storage vessels used in such processes. Notice 179 Motor & heating fuels: General information and accounting for Excise Duty & VAT, paragraph 3.3.1 and section 1D provide general information on what is considered to be production of oil for duty purposes. We will not regard basic filtration or gravity separation (without heat etc) as oil production, and if you only carry out these processes, although you are still a producer, you will not need to enter your premises. See ‘Other producers and suppliers’ below for what you need to do.

To apply to enter your production premises, please complete Form EX103 (if a sole trader or partnership) or Form EX103A (if an incorporated company). Send completed forms to:

Mineral Oil Reliefs Centre
HM Revenue & Customs
Dobson House
Regent Centre
Gosforth
Newcastle upon Tyne
Tyne and Wear
NE3 3PF

You will then be contacted to arrange a pre-registration visit.

If you intend to produce an oil which meets another fiscal description, such as gas oil, you will need to apply for approval as a motor and heating fuels warehouse in which to store these new products. If you plan to import or export from producers’ premises you will also need to apply for warehouse approval. Further detail can be found in Notice 179 Motor & heating fuels: General information and accounting for Excise Duty & VAT, part 3 and section 1D. Apply by completing Form EX 70 together with Form EX 61 (to register as an authorised warehousekeeper). Please send completed forms to:

National Registration Unit
HM Revenue & Customs
Portcullis House
21 India Street
Glasgow
G2 4PZ

All forms are available on our website under 'Find a form' or from our National Advice Service (NAS) on Tel 0845 010 9000.

Financial security

Whether you just enter your premises as a producer or you have to provide an excise warehouse, you may be required to provide financial security in respect of all or part of your activities. You may also be required to provide financial security in respect of deliveries in certain circumstances. Whether this is the case or not will be determined at the pre-registration visit. Further information about financial securities and how we quantify them can be found in Notice 196 Excise goods: Authorisation of warehousekeepers, approval of premises, paragraph 4.3.

Measurement

The unit of measurement for excise duty and stock accounting purposes is litres @ 15°C (Standard Litre). However, in cases where it is impractical, or unreasonable, to convert measurements to standard litres, we do apply a de minimis limit of 80,000 litres per transaction for fuels for non-road use. Notice 179 Motor & heating fuels: General information and accounting for Excise Duty & VAT, Section 1H refers. You will be required to take measurement using the most accurate means available. We set minimum acceptable levels of accuracy for the various types of measurement systems that may be employed and details of these can be found in Notice 179 section 4. How these apply to you and what you may need to do to ensure that you can meet our measurement requirements will be discussed during the pre-registration visit.

Records

As a revenue trader, you will be required to keep certain records, in particular relating to duty accounting and, as a producer, in regard to stock accounts. You will find more information on our requirements in Notice 179 section 13 and you will be able to discuss how your existing records serve to meet these requirements and what enhancements may be required during the pre-registration visit.

Accounting for and paying excise duty

If you obtain warehouse approval, or you enter your premises as a producer, you will need to pay excise duty before oil is delivered from, or used in, your warehouse. You must complete form W50 and send it with immediate payment to:

National Warrant Processing Unit
44 York Place
Edinburgh
EH1 3JW

Alternatively, you may obtain approval to defer the duty and account for it on Form HO10. Further information and how to apply for deferment can be found in Notice 179 part 10. You should apply to:

HM Revenue & Customs
Accounting Services
Central Deferment Office
10th Floor South East
Alexander House
21 Victoria Street
Southend on Sea
Essex
SS99 1AA

You will normally be required to provide financial security if you wish to use this facility. However, you may apply for authorisation under the Excise Payment Security System (EPSS) to defer payment without a financial guarantee. You will need to complete Form EPSS(A). Frequently Asked Questions (FAQ) on EPSS can be found on our website.

Other producers and suppliers

If you are a producer or supplier of waste heavy oil, but you are not required to apply for warehouse approval or enter your premises, you must still pay the excise duty due in advance of each supply made for use as heating fuel or for use as fuel in an engine. You will have to do this even if you simply supply or use waste oil for this same purpose, without carrying out any production process on it. We will provide a form for this purpose and will announce further details of the form and where to send it in the near future. Alternatively, notification with payment can be made on any other document provided it contains the following information:

  • the supplier's name
  • the supplier's address
  • the supplier's VAT Registration Number (if applicable)
  • the date(s) on or after which the supply or supplies will be made
  • the quantity or quantities of relevant oil in relation to which payment is made
  • the rate for rebated fuel oil at the time of payment
  • the total rebate amount (for each transaction included on the notification)

A receipt will be issued as proof of payment. Keep this as part of your records.

Marine waste heavy oil

Excise duty relief on heavy fuel oil waste from ships ceases following the ending of the EU derogation. The waste can be collected for removal directly to entered premises or an excise warehouse without attracting excise duty. The use to which the waste oil is put will determine if there is excise duty to pay on removal from duty suspension to home use. If you are involved with the handling and recovery of marine oils, you should follow the procedure outlined in this brief.

Due consideration will need to be given to customs formalities, including accounting for customs duty and import VAT.

Supplies of atmospheric residue

Atmospheric residue is currently an untaxed fuel, when put to heating use or as fuel in an engine

If you are a producer of atmospheric residue and you have already entered your premises, you will now need to ensure that your systems can account for excise duty on deliveries for fuel purposes. Where you have not yet entered your premises, you should take immediate action as outlined in this brief.

Further advice

If you have any questions about this change, please contact the NAS on Tel 0845 010 9000.


About the Author

© Crown Copyright 2008.

A licence is need 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 2008-09-20 07:42:12 in Tax Articles

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