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HM Revenue and Customs Brief 50/08

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HM Revenue and Customs -Tax Authorities

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Issued 6 October 2008

Energy Products Directive - Expiry of the derogations allowing a reduced rate or exempt fuel for private pleasure-flying

Purpose of this brief

The purpose of this brief is to inform:

  • Registered Dealers in Controlled Oils (RDCOs) who supply aviation turbine fuel (avtur) for private pleasure-flying
  • users and purchasers of avtur for private pleasure-flying

of the changes that are being introduced with effect from 1 November 2008.

Implementation date

The changes will take effect on or after 1 November 2008.

From 1 November 2008 it will be illegal for avtur to be used for private pleasure-flying unless the purchaser of the fuel declares that is their intent and that they have a legal obligation to pay the duty due on it to HM Revenue & Customs (HMRC).

Registered Dealers in Controlled Oils (RDCOs) who make supplies of avtur for private pleasure-flying will be required to draw the attention of the purchaser to the requirement to pay duty to HMRC and to retain purchasers' declarations.

Background

The UK held a derogation from the Energy Products Directive (EPD) (2003/96) which permitted a reduced or exempt rate of excise duty on fuel used for private pleasure-flying. This expired on 31 December 2006. The changes that are being introduced are required in order to comply with European legislation.

Outline of scheme

Two main fuels are used in flying: aviation gasoline (avgas) which is used mainly in small piston-engined aircraft and aviation turbine fuel (avtur) which is used in jets and turbo-prop aircraft. Helicopters use both avtur and avgas.

A new fiscal definition of avgas with a free standing duty rate will be introduced on 1 November 2008. The duty rate will be 30.03 ppl. This will apply to both commercial and pleasure use so there will be no change to the current procedures.

Avtur is fully rebated so has a nil rate of duty, It is a controlled fuel with all suppliers being registered as a Registered Dealer in Controlled Oils (RDCO).

Users of avtur for private pleasure-flying will be required to pay 'an amount equal to the rebate', which we shall refer to as 'duty', to HMRC. At the time of purchase, the user will be asked to make a declaration if the fuel is to be used for private pleasure-flying and acknowledge the obligation to pay the duty. The supplier will retain the declaration. The user will have at least 30 days to pay the duty.

There is no change to the current duty rate or procedures for the use of any other fuels used in private pleasure-flying.

RDCOs' responsibilities

All suppliers of avtur are RDCOs. RDCOs have a general duty of care to ensure that supplies are only made to customers who have a legitimate use for that oil. That duty of care will be extended from 1 November 2008 to include an obligation to draw to the attention of the purchaser the requirement to pay the duty to HMRC, if the supplier thinks that the avtur they are supplying might be used for private pleasure-flying.

If the purchaser states that the fuel will be used for private-pleasure flying then the supplier will be required to obtain a signed and dated declaration from the purchaser to that effect and retain it with his records for future inspection by HMRC if required. If the purchaser states that it is not for private pleasure-flying then the supplier must note his records to that effect.

Declaration

The wording of the required declaration is:

'I declare that some or all of the kerosene purchased is to be used for private pleasure-flying. I am aware that, on the quantity of kerosene used for private pleasure-flying, I have a legal obligation to pay to HM Revenue & Customs an amount equal to the rebate allowable on a like quantity of kerosene at the time of this declaration.'

It must also show the name and address of the declarant who must sign and date it.

It is up to the supplier to decide how to incorporate the declaration into his records, for example it may be included on a sales invoice, but he must ensure that the name and address of the purchaser is also noted in the records and that the purchaser signs and dates the declaration.

The declaration may also be made on plain paper as long as all the required information is noted ie name, address, signature and date.

Users responsibilities

Users are responsible for declaring and paying the duty due to HMRC not RDCOs.

A payment form Payment of Duty on Avtur used for Private Pleasure Flying will be available from the HMRC website and the National Advice Service (NAS) Tel 0845 010 9000 during November 2008. However, use of the form will not be obligatory as long as all the information on it is supplied at the time the payment is made, that information is:

  • name and address
  • quantity of avtur purchased
  • date of purchase
  • name and address of supplier
  • rate of rebate/duty, and the total duty due

The purchaser will be required to pay the duty within 30 days of the end of the month in which the declaration was made and so the fuel was purchased. If several purchases are made these can be made on one payment form on a monthly basis.

The form and payment are to be sent to:

HM Revenue & Customs
Cumbernauld Accounting Team
Room ELG.03
Accounts Office
St Mungo's Road
Cumbernauld
G67 1YZ

Payment may be made either by cheque or electronically by BACS or CHAPS. If you wish to pay electronically you will have to obtain a reference number and the account details in advance. The number to phone for these details will be made available at a later date and will be in the public notice. If you pay electronically you must still send the required information or completed form to the above address quoting the reference number.

If you use your plane/helicopter for both private pleasure use and business you will have to declare at the time of purchase whether or not the fuel is to be used for private pleasure or business/commercial. If a quantity of fuel is to be used for both purposes you will have to estimate the amount of fuel used for pleasure flying on which duty will be have to be paid.

If you buy fuel with the intention to use it for business purposes but subsequently use it for private pleasure use you will have done so without making a declaration, which renders you liable to a civil penalty. Therefore, if there is any likelihood of the fuel being used for private pleasure then the purchaser must make a declaration and keep a note of the change in circumstances should HMRC wish to verify.

HMRC will be able to establish sales of avtur for private pleasure purposes in the course of routine assurance visit to suppliers and will be able to check whether or not subsequent duty payments have been made.

Rate of duty

The rate of duty is the same rate for kerosene used as motor fuel, currently 50.35ppl. Up to date information on rates of duty is available on the HMRC Website or from the NAS.

Definition of private pleasure-flying defined

The definition of 'private pleasure-flying' is as in the Energy Products Directive:

'Private pleasure-flying' shall mean the use of an aircraft by its owner or the natural or legal person who enjoys its use either though 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.'

For these purposes 'private pleasure flying' means flying other than in the following circumstances:

  • commercial operation or use of aircraft by companies for the carriage of passengers or goods as an aid to the conduct of their business and the availability of the aircraft for whole aircraft charter, flown by a pilot (or pilots) employed to fly the aircraft
  • the non-commercial operation or use of aircraft by a company, for the carriage of passengers or goods as an aid to the conduct of company business, flown by a pilot (or pilots) employed to fly the aircraft
  • the non-commercial operation or use of aircraft by an individual for the carriage of passengers or goods as an aid to the conduct of his/her business or his/her employer's business

And excludes the following (the list is not exhaustive):

  • flying in support of emergency services such as police, air ambulance and medical repatriation and transport of medical and humanitarian supplies
  • air taxis
  • corporate operations where a company owns and operates its own aircraft using professional pilots
  • training, if provided through an approved training school or by a qualified instructor, and the trainee pilot is under the supervision of an instructor whether or not that instructor accompanies the student
  • mail services and freight services
  • agricultural, aerial survey, aerial photography, support for coast guards duties
  • flying for maintenance, engineering development and testing

Private pleasure flying includes the following (the list is not exhaustive):

  • flying for recreational purposes, whether alone or carrying passengers unless they are fee paying
  • flying as a means of personal transportation other than for business purposes

A new public notice on the new procedures will be available in November.


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 2008-10-08 13:58:39 in Tax Articles

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